You may have spotted in the press that the government has announced that probate fees will be changing from April 2019. You may recall there were similar, but even more drastic, proposals a couple of years ago but they were shelved when the snap election was announced in Spring 2017.
The latest announcement, being just over a week after the government seemed to have plenty of money to give away in the Autumn Budget, and being targeted at the recently bereaved, has met with a lot of criticism, not least for being another example of a stealth tax brought in under the radar.
These are the latest proposed changes in probate fees:
- Estates worth less than £50,000 will pay nothing, meaning estates worth between £5,000 and £50,000 will save £215 compared to the current system.
- Estates worth from £50,000 up to £300,000 will pay £250, a rise of £35.
- Estates worth from £300,000 up to £500,000 will pay £750, a rise of £535.
- Estates worth from £500,000 up to £1 million will pay £2,500, a rise of £2,285.
- Estates worth from £1 million up to £1.6 million will pay £4,000, a rise of £3,785.
- Estates worth from £1.6 million up to £2 million will pay £5,000, a rise of £4,785.
- Estates worth more than £2 million will pay £6,000, a rise of £5,785.
As you can see, the amount of fees payable are going to be markedly more for many personal representatives and as they need to be paid before probate is granted, in certain cases they may need to borrow money to pay the fees before they can get hold of the estate funds. This is hardly ideal!
So what can be done to avoid or reduce the increased fees?https://www.friendandgrant.co.uk/what-we-do/reducing-tax-burden/
Well not all estates need to go through probate, and even where they do certain assets will be exempt from inclusion. Examples are assets that are in joint names; for land and property this includes that held as joint tenants but excludes that held as tenants in common. If spouses or civil partners currently have a lot of their investments held separately it could be preferable to put them into joint names to reduce the estate that needs to go through probate. This is not always possible though, such as for ISA products.
Another example of an asset that is excluded from probate is one which is held in trust, even where the previous owner still has an interest in the asset. An example of this is where the family home is placed into a trust but the person who previously owned it (the settlor) still lives in it. Although this transaction has no tax saving benefit and the asset will need to be included on the Inheritance Tax Return, it does not technically go through probate and hence will reduce the fee payable under the planned changes.
In addition, assets that are gifted prior to death, even if this occurred within 7 years of death and therefore there is potentially inheritance tax to pay on the gift, will not go through probate. Again they will need to be included on the tax form but will not be added to the estate when computing the fee payable.
We have been working with a number of our clients reviewing their estates with a view to reducing inheritance tax, and with the planned probate fee increases it is even more important that you know how much your estate is worth, and what can be done to reduce the amount the government will take before your beneficiaries get their share.
If you’d like to book a meeting to discuss estate planning contact Jan Friend by email or call her on 01634 731390.
The content in this blog is correct as at 22nd November 2018. See terms and conditions.