Massive hikes in probate fees come under attack as stealth tax

Posted: 3/8/2016

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Ministry of Justice proposals to implement massive hikes in probate fees have come under attack.

The Ministry is planning to introduce a sliding scale of charges for probate fees, which currently cost a flat rate of £215.

Those seeking a grant of probate in order to administer estates over £2m will be charged £20,000 – a 9,200% increase –  and those between £1.6m and £2m will be charged £12,000. Only estates below £50,000 will be exempt from charges. These were the changes proposed in a consultation, now ended.

Lawyers from Irwin Mitchell Private Wealth say the proposed new rules are effectively a new tax that will hit property owners who are asset-rich but cash-poor, and rural families with small farms.

It warns that people could try to sidestep the punitive charges, which could have unintended consequences.

For example, older people could be pressurised into giving away assets.

Beneficiaries could also be forced to take out large loans in order to be granted probate.

Sarah Phillips, partner at Irwin Mitchell Private Wealth, said: “These changes amount to a new form of taxation, as the existing fees of £215 fully meet the cost of the probate service.

“It’s a largely administrative function, for which fees up to £20,000 are quite disproportionate, but it’s a vital one as without it executors cannot obtain the grant of probate to enable them to administer a deceased person’s estate.

“Estates would be unfairly affected as they would pay Inheritance Tax on the fees as well, which are not deductible from the value of the estate when calculating tax payable.

“Individual beneficiaries, who are asset-rich but cash-poor, would be badly affected by the need to raise such considerable sums to obtain probate.

“Many will have no alternative but to go to the expense of a bank loan to pay the fee. Unless the house is being sold, it then leaves a problem as to how the loan is repaid.”

The firm says the most effective way for families to avoid the new charge is to ensure couples own their homes in joint names or as tenants in common, or write assets into a trust.

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