Proposed Change in Government Probate Charges Will Create Potential Confusion for Executors
May 5, 2016 2:58 pm
When the government announced the ‘Family Home Allowance’ in 2015 this was widely seen as good news for families whose main home had significantly increased in value purely because of its location. The phased reduction in Inheritance Tax will culminate in complete exemption on family homes valued at up to £1 million by 2020 which means that many family estates will soon fall below the Inheritance Tax Threshold. This change in inheritance tax on property, will mean a reduction in revenue for the government and perhaps as a consequence there is now a proposed increase in probate charges. Currently there is a flat probate fee of £215 on all estates over £5000 but under new proposals this will be replaced with a complex tiered system which has some potential pitfalls for executors.
Not everyone will lose out if these changes in inheritance tax and proposed probate charges are brought in. Anyone inheriting from small estates will benefit. Executors and administrators dealing with lower value estates won’t need to calculate or pay inheritance tax, similarly estates valued below £50,000 would not be liable for probate charges. Difficulties arise as soon as the estate is valued at more than £300,000 with a new proposed probate charge of £1000, nearly five times the current level. The biggest increase will be for estates valued at £2 million and above as these will see a maximum increase in probate charges of up to £20,000, an increase of more than 930%. Executors will have to pay these probate charges up front, before grant of probate and the full release of estate funds.
The proposed change in probate will make estate management increasingly complex for executors who are already liable for any mistakes they make in the management and distribution of an estate. Executors are already responsible for paying funeral fees, insurance, contributions towards inheritance tax all prior to grant of probate and the full release of estate funds. With the addition of higher probate fees more executors may be forced to take out a loan to cover costs. Banks and building societies are finally starting to accept that there is a real problem for executors who can’t obtain grant of probate until these financial obligations have been fulfilled. Last year many confirmed that they will now release more funds from deceased banks accounts without full grant of probate but figures vary considerably between banks. The real concern though is these proposed changes in probate will create confusion for executors who are already faced with unlimited liability if they make a mistake.