Soaring fees set deadline for executors and estate planning

Controversial court fees, branded a stealth tax on bereaved families, are expected to prompt a surge in probate applications before the hike takes effect. The new banded fee structure will see the cost of probate soar by thousands of pounds for higher-value estates.

The current flat fee is £215 for a personal probate application, or £155 when handled through a solicitor, but this will be replaced by a tiered fee structure. While the fees have been reined in from the original proposal last year, which would have seen charges of up to £20,000, the biggest estates will still pay £6,000 in court fees.

The fees are payable to the court when the executors apply for a Grant of Probate or Letters of Administration (the formal authority to administer the estate), once they have identified and itemised all the assets owned by the deceased. This follows submission of the inheritance tax return for the estate and payment of any inheritance tax that is due.

Until the application for a Grant of Probate or Letters of Administration has been approved by the court, the executors are unable to gather in the assets of the estate. Funds cannot be obtained from bank and building society accounts, shareholdings cannot be sold or transferred to beneficiaries, and no houses or commercial property can be sold.

As no funds can be distributed until the Grant has been issued, except for funeral costs and inheritance tax, there are concerns that families will struggle to pay the probate fees from their own savings before they can access the funds locked in the deceased’s estate.

Those estates that comprise high-value property, but are short on liquid assets, may find themselves paying high court fees without any expectation of cash to offset the cost. This could be the case where a husband or wife has died, and the survivor needs a grant of probate to transfer the family home into their sole name.

Ashtons Legal solicitors said: “For executors who are already in the process of administering estates, especially larger ones where the increased fees will be more of a hit, it’s worth reviewing the position to see if they can get the estate ready to apply for probate sooner rather than later. It’s currently expected to be April when the switch is made to the tiered fee structure, but it could be earlier, and there will be just 21 days from the announcement until the new fees kick in.”

Ways in which forward planning may help include taking out a life insurance policy and putting it in trust. If made over in this way for the benefit of a family member or other beneficiary, the payout will not be included within the estate and can be accessed on death without the Grant of Probate.

Leaving property to a surviving spouse by means of a trust rather than an absolute gift will reduce the value of the surviving spouse’s estate for the purposes of the court fee calculation when he or she dies.

Ashtons added: “The important thing when estate planning is to make sure you understand all the implications and check that what you’re planning will solve the problem and not create a new one, which is why you do need to get specialist advice if you’re getting into more technical areas.