Posted on: 03-03-2017 in Retirement Planning
The UK Government this week announced changes to the way that “probate” is charged, with a new sliding scale coming in from April 2017 to replace the old flat fee system.
And if you’re one of the 58% of the UK population with an estate to pass on that’s worth less than £50,000, probate won’t cost the executor of your will anything.
But if your estate is worth over £50,000, you will pay more after April for probate – with how much more depending on the value of your estate, according to the simple set of price bands set out below:
|Value of estate
(before Inheritance Tax)
|What % of the UK population have this?||
New Probate fee
|Fee as % of lower estate value bracket*|
* The column furthest to the right shows the new probate fee as a % of the lowest estate value to which it applies. This (non-official) calculation is to show which band of estate values get hit hardest proportionally. These calculations are for illustration only, and should not be taken as financial advice or the basis for further calculations.
Source: Ministry of Justice/Daily Telegraph
Probate is a legal process to do with Wills. It kicks off the chain of legal events that needs to happen to “action” somebody’s Last Will & Testament when they have died.
“Probate” describes the process by which the Executor of the Will has to apply for a “grant of probate” from the probate registry office.
Getting this grant of probate gives the Executor of the Will the right to administer the Will and begin the series of legal processes that leads to the estate of the deceased being divided up.
(The Executor of the Will is the person whom the deceased has nominated to administer the Will; it can be a friend or relative, but is often a solicitor.)
Applying for a grant of probate costs:
for executors who are friends or family of the deceased: a flat fee of £215
for executors who are solicitors: a flat fee of £155
And remember …
Well, off the bat, the good news is that, as of the new tax year in April, 58% of Brits won’t have to pay anything at all for probate – those with an estate worth less than £50k.
The new probate fee kicks in across successive bands for estates worth over £50k.
We’ve calculated the probate fee in each new band as a percentage of the lowest benchmark figure to which it applies (see column 4 in table above).
This calculation shows which estate value gets hits hardest proportionally.
If your estate is worth over £2m, you’re going to be paying as much as 1% of your estate value with a fixed probate fee of £20,000. The Ministry of Justice calculates that this will apply to one in every two hundred Brits.
But if you are one the 23% of the UK population with an estate valued between £50k and £300k, you will only have to pay marginally more than you did before – with probate costing your Executor £300 rather than £215/£155. This means that (according to our column 4 calculation above) probate will cost you a maximum 0.6% of your total estate.
And if you are one the 11% of Brits with an estate of between £300k and £500k, the new probate fee of £1000 will only cost you a maximum 0.33% of your total estate.
The Chicken-And-Egg Situation
Depending on the value of your estate, it may suddenly look like your Executor is going to have find some serious money at a time when all the deceased’s money is still legally inaccessible.
Remember, the key thing about Probate is that, until it is authorised, NONE of the funds tied up in the Will can be accessed by anyone.
So, if extra money isn’t put aside beforehand, the Executor of your Will may find him/herself in a Chicken-And-Egg situation – the funds of the deceased can’t be accessed until probate fees are paid, but the funds of the deceased are needed to pay for Probate!
Solution to the Chicken-And-Egg Situation
Write a Life Insurance Policy into Trust to ensure that funds to pay probate fees will immediately be available to the Executor of your Will after your death.
(Don’t even begin to try and “write a Life Insurance Policy into Trust” on your own! This is legal work that requires a solicitor and, if you are an expat, ideally a broker of some sort with a foot in each of the UK and your adopted country, to co-ordinate the cross-border tax planning implications. You want your Will to be the centrepiece of a co-ordinated financial strategy, and this will require independent financial expertise on top of what a solicitor can offer you in terms of the legal leg-work.)