Larger estates face higher probate fees, in some cases many thousands of pounds more, following the confirmation of new tiered fees.
The Ministry of Justice has confirmed the new probate fees which will be introduced in April 2019 following a consultation last March, which was then postponed ahead of the general election in June. The fees have now however been confirmed as going ahead.
Under the current fee structure for probate, estates in England and Wales pay a flat fee of either £215 or £155, with the lower fee charged for executors who use a solicitor.
The new probate fees from April 2019 will be linked to the size of the estate on death.
For estates valued up to £50,000, there will be no change in probate fees, which will remain at £215 or £155.
Estates valued between £50,000 and £300,000 will pay probate fees of £250. This rises to £750 for estates valued between £300,000 and £500,000.
For estates worth between £500,000 and £1m, the probate fee will be £2,500. It will be £4,000 for estates between £1m and £1.6m.
There’s a £2,500 probate fee for estates valued between £1.6m and £2m, and the highest probate fee of £5,000 will be charged for estates valued over £2m.
Estates will never pay more than 0.5% of the estate value in probate fees, but these new fees are substantially higher than existing fees for larger estates. An executor administering an estate worth £500,000 would pay 10 times more than current probate fees.
According to the Ministry of Justice, 80% of estates will pay no more than £750 in probate fees under this new tiered charging structure and around 25,000 estates each year will become exempt from the fees.
The Ministry of Justice is increasing these fees to raise more money to run and improve the probate service, including the ability to apply for a grant of probate online. Money will also go towards running the courts and tribunal service.
One way to reduce the cost burden of these higher probate fees will be to use trusts, where the value is excluded from the calculation of the estate value used to determine probate fees.
Lifetime gifting is also an option to consider, reducing the value of the estate before death
Where lifetime gifting is used to reduce estate values and future inheritance tax burden, it’s important to construct a comprehensive financial plan in the first instance, in order to consider the risk of running out of money in your lifetime.
We have concerns that larger estates which are asset rich but cash poor could struggle with these new probate fees, as it could force the sale of assets to cover the fees.
Married couples and civil partners who are exempt from inheritance tax on transfers of assets between spouses are one group likely to be looking for cash to cover these new higher fees.
We are waiting to hear more details about how the new probate fees system will operate and when fees will become payable.
Commenting on the new probate fees, Parliamentary Under Secretary of State for Justice Lucy Frazer QC MP said:
“Fees are an essential element of funding an effective, modern courts and tribunals service, thereby ensuring and protecting access to justice. “The Government is investing £1 billion to modernise and upgrade the courts system so that it works even better for everyone, including victims, witnesses, litigants, judges and legal professionals. This includes introducing changes to our Probate Service, who offer an important service to those who are bereaved.”