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Probate fees restructure: who will benefit?

The government has put forward draft proposals to change the current probate fees structure – but who will benefit from these changes? The public purse? Beneficiaries of an estate? The straightforward answer is that in some circumstances, both will.

Current probate fees

The people who deal with an estate after someone has died are known as ‘personal representatives’ (these will be the executors, if there is a will) and they are responsible for applying for a Grant of Representation (probate) to be able to deal with the estate. When a personal representative applies for the grant under the current rules, they need to pay a court fee of £215 (or £155 if solicitors are making the application on their behalf). If an estate is worth less than £5,000 then no fee needs to be paid.

Proposed probate fee structure

Under the new fee structure, the government has proposed that no court fee will be payable for estates that are valued at £50,000 and under. This will evidently benefit a number of estates – but at what cost? It is well recognised that the court system is struggling with a huge deficit in respect of the funding it requires: in 2016/17, the court system cost £1.6 billion to run but less than half of the running costs were recovered through court fees. To add to the financial pressures, the government is investing £1 billion to upgrade court facilities and, as would be expected, an increase in income is required to fund this. The government has estimated that the new probate fee structure will raise over £145 million during 2019/20, with these funds being reinvested back into the court system.

Disadvantages of proposed probate fee restructure

The rather significant disadvantage of the probate fee restructure is that estates valued at more than £50,000 will attract a higher fee than is currently in place. The new probate fees due to come into effect in April 2019 are:

  • Estates valued up to £50,000: £0
  • Estates valued above £50,000 but less than £300,000: £250
  • Estates valued above £300,000 but less than £500,000: £750
  • Estates valued above £500,000 but less than £1 million: £2,500
  • Estates valued above £1 million but less than £1.6 million: £4,000
  • Estates valued above £1.6 million but less than £2 million: £5,000
  • Estates valued above £2 million: £6,000.

The government has calculated that 58 per cent of estates in England and Wales will benefit from the new fee structure and will not incur a fee for probate. However, some of the higher-value estates will feel the brunt of the new fees. Critics have labelled the increased fees as another death tax and consider it unfair that beneficiaries of an estate, who are often close relatives, will see their inheritances reduced according to the value of the estate.

An additional difficulty is that the probate fee will need to be paid at the same time as applying for the grant; this means that personal representatives will have to find adequate funds to make the application at a time when the deceased’s assets are often frozen and cannot be accessed. This could result in personal representatives having to take out bank loans in their own names, with the estate possibly bearing interest on these loans.

Prepare for higher court fees

Although the revised fees are still just proposals, it is very likely that they will be implemented by the government at some point. It cannot be ignored that funding for the court system needs to come from somewhere; previous plans to raise probate fees in the past were withdrawn at the last minute and the same could happen again. However, the current fee structure is vulnerable to change, as it has been place since 2014 and cannot support the running costs of the court system. If the new fees do come into force in April, personal representatives will need to prepare themselves for finding higher court fees and for advising beneficiaries how this could affect the amount of inheritance that they receive at the end of the process.

For more information on the proposals or on probate matters in general, please contact Rebecca Elliott, solicitor in the Private Client team, by emailing [email protected] or calling 0117 394 5026.

Posted on Feb 6th, 2019 by Lyons Davidson