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Ministry Of Justice To Increase Probate Fees

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http://www.ftadviser.com/2016/07/12/investments/property/homeowners-to-be-hit-with-k-probate-fees-OtyA73VvHvk0nUDljGyd2J/article.html?

Homeowners to be hit with £20k probate fees

It is usually required if a deceased person has no will, has more than £5,000 in savings and their estate includes assets such as property or shares.

Following a consultation from the Ministry of Justice earlier this year, the government is planning to introduce a sliding scale of charges for probate fees, which previously cost £215. Estates worth between £1.6m and £2m will be charged £12,000.

Only those below £50,000 will be exempt from charges.

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

That 'poor old pensioner in a big house' meme I've mentioned... or "No one gets out of here alive" Jim Morrison 1967.

Property is the ultimate piggy bank for the exchequer. Nobody figured that out yet?

£50k threshold? How's that going to work out?

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Proposed new probate fees before inheritance tax:

  • £300 for estates worth more than £50,000 and up to £300,000
  • £1,000 for estates worth more than £300,000 and up to £500,000
  • £4,000 for estates worth more than £500,000 and up to £1m
  • £8,000 for estates worth more than £1m and up to £1.6m
  • £12,000 for estates worth more than £1.6m and up to £2m
  • £20,000 for estates worth more than £2m
  • Sounds like they've just added a fraction of a % to inheritance tax.

The £20k over £2m is a bit lax - they should keep on with the progressive taxation (ie, just have it at 1% over £2m - this way a huge estate will pay a lower % than an estate with a house in the SE.)

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So, do the executors of the will have to pay the fee upfront before probate is granted? If so I forsee problems.

You just sell assets to cover the costs. If there are no assets then there is nothing to pay. (in fact, this is now 'better' - the threshold below which probate is 'free' has increased from £5k to £50k.). If you have significant assets then the fees are tiny compared with inheritance tax.

I guess the only slight complication would be a child who inherits a large family house - say, £1m in the SE - might have no inheritance tax to pay, but would have to stump up £4k for probate. But even then, very few people would have difficulty finding the £4k (eg, even if you didn't have the cash you could borrow the money etc).

This change is unlikely to have any effect other than a slight increase in the tax take off estates.

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I haven't done it yet, but any idea how much a relatively complex will (say a mix of assets, inheritable pensions, some overseas stuff) would cost to sort out anyway if you didn't DIY?

And is probate really as onerous as all that anyway? Assuming all potential inheritors on good terms and things can be sorted amicably?

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I haven't done it yet, but any idea how much a relatively complex will (say a mix of assets, inheritable pensions, some overseas stuff) would cost to sort out anyway if you didn't DIY?

Solicitor would be 2% - 3% ish. Minimum about £2k. More if you get a bank to do it (don't get a bank to do it...)

And is probate really as onerous as all that anyway? Assuming all potential inheritors on good terms and things can be sorted amicably?

Not so difficult, but then it comes at a difficult time for most people. And while most things would hopefully be amicable, it is useful to have an independent party involved in splitting up the estate (then no-one thinks in the future that maybe it wasn't fairly split).

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Solicitor would be 2% - 3% ish. Minimum about £2k. More if you get a bank to do it (don't get a bank to do it...)

Not so difficult, but then it comes at a difficult time for most people. And while most things would hopefully be amicable, it is useful to have an independent party involved in splitting up the estate (then no-one thinks in the future that maybe it wasn't fairly split).

Thanks very much. Wow 2k is a fair whack. I'm going to have a go at doing it myself for my parents and I, and then just getting it looked over.

Basically my understanding is a mirror will for my parents, with the right mix of the word predeceased. A couple of bits and pieces will go to my sibling on the first passing - an iht exempt drawdown sipp being the major one. Then transfer the largely unused nil rate band over on the second passing. I think I need to just make sure that the sipp provider knows who the successor should be - not the other parent in this case.

With the new rule on the house being (or slowly becoming over the next few years as the max value gets tapered in) should be able to reduce any potential iht liability to zero.

Then another will in the other country to deal with the assets there, that doesn't revoke the first.

I don't think it's too tough...and if it saves 6k on all of us doing it in game for a laugh.

(Also can't see it being classed as unfair in this particular case :-) - I'll be the executor who's deliberately forgoing almost all of the assets as my sibling should have them - they have a family, I probably never will).

Edited by Frugal Git

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I

Thanks very much. Wow 2k is a fair whack. I'm going to have a go at doing it myself for my parents and I, and then just getting it looked over.

Basically my understanding is a mirror will for my parents, with the right mix of the word predeceased. A couple of bits and pieces will go to my sibling on the first passing - an iht exempt drawdown sipp being the major one. Then transfer the largely unused nil rate band over on the second passing. I think I need to just make sure that the sipp provider knows who the successor should be - not the other parent in this case.

With the new rule on the house being (or slowly becoming over the next few years as the max value gets tapered in) should be able to reduce any potential iht liability to zero.

Then another will in the other country to deal with the assets there, that doesn't revoke the first.

I don't think it's too tough...and if it saves 6k on all of us doing it in game for a laugh.

(Also can't see it being classed as unfair in this particular case :-) - I'll be the executor who's deliberately forgoing almost all of the assets as my sibling should have them - they have a family, I probably never will).

Fair enough - but I'd add:

Work out how to do it now so that you're not working out how to do it while in grief... and while siblings are looking at you trying to educate yourself while thinking that they'd prefer a professional to do it...

The sad truth about many professions is that in the end they don't cost as much money as you think:

Accountants know how to arrange your finances to minimise (legally) tax - most people end up broadly cost-neutral, but save all that time and effort...

Estate agents know how to value and negotiate - most people end up broadly cost-neutral because the agent gets in more to cover their fees, and then save all that time and effort...

And probate solicitors know how to arrange the probate to minimise (legally) tax - most people end up broadly cost-neutral, but save all that time and effort...

You probably wouldn't be that much worse off using a solicitor, but you would save all that time and effort...

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I

Fair enough - but I'd add:

Work out how to do it now so that you're not working out how to do it while in grief... and while siblings are looking at you trying to educate yourself while thinking that they'd prefer a professional to do it...

The sad truth about many professions is that in the end they don't cost as much money as you think:

Accountants know how to arrange your finances to minimise (legally) tax - most people end up broadly cost-neutral, but save all that time and effort...

Estate agents know how to value and negotiate - most people end up broadly cost-neutral because the agent gets in more to cover their fees, and then save all that time and effort...

And probate solicitors know how to arrange the probate to minimise (legally) tax - most people end up broadly cost-neutral, but save all that time and effort...

You probably wouldn't be that much worse off using a solicitor, but you would save all that time and effort...

You are absolutely right on all of the above, though as I like learning about random crap anyway I'm happy enough to give it a go. I'm pretty OK on tax affairs myself, disgracefully spending more than the occasional lunchtime reading the HMRC site for a giggle.

So with that in mind, and feeling motivated I just drafted three wills (with a bit of searching I found a template that looks appropriate), including mirror one for my folks that encompasses various clauses in the event of one predeceasing the other and covering the current nil rate band legislation. That nil rate band change does simplify matters considerably in writing these things.

From my understanding of probate, mine is really the main one that needs to get sorted despite being 3 or 4 decades younger than my folks. If something happens to me at the moment and I die intestate, my assets go up to my parents. That would certainly create a subsequent IHT liability on my parents death that ironically I would have been the only one au-fait enough to subsequenly mitigate against (Mum, give everything I 'gave' you away right now and please live another seven years!).

I'm going to forward it on to my sibling and my folks and they can take a gander. We're a tight nit bunch and a lucky bunch too fortunately.

After that I'll run them by a solicitor and see what they say. Thanks again for the advice - it certainly got me moving on doing something!

Anyway, apologies for all the noise on the thread.

Edited by Frugal Git

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I haven't done it yet, but any idea how much a relatively complex will (say a mix of assets, inheritable pensions, some overseas stuff) would cost to sort out anyway if you didn't DIY?

And is probate really as onerous as all that anyway? Assuming all potential inheritors on good terms and things can be sorted amicably?

I was one of the named executors of my father's estate, and I handled virtually everything myself, including the completion of the IHT400 account to HMRC and all of the supporting forms. I didn't use a solicitor at all, but I did get our accountants to check every aspect of my workings and they actually submitted the forms to HMRC as agent (it was a complex estate and I felt it would look better if it came from a large accountancy firm rather than me personally).

It's fairly straightforward if you're a methodical individual who has no trouble doing their own self-assessment tax return, and it makes a big difference if the deceased was disciplined with their record-keeping (which my father was), but it was extremely time-consuming which is why I was largely absent from this site for over six months.

Depending on the estate, you may not have to complete IHT400 but can just complete IHT205 instead (especially on first death where the spouse receives most assets either automatically by survivorship or as the residuary beneficiary in the will).

Initially you can find most of the info you need at https://www.gov.uk/topic/personal-tax/inheritance-tax

If you need to complete IHT400, I recommend you also read HMRC's Inheritance Tax Toolkit.

I also suggest you buy Probate - The guide to obtaining grant of probate and administering an estate, which I found helpful. It was first published in 2010 so parts will be a little dated, but the basic procedure and warnings of potential pitfalls still hold.

For IHT planning, Carl Bayley's How to Save Inheritance Tax is a pretty good starter and will be enough for most people.

Ray & McLaughlin's Practical Inheritance Tax Planning is more comprehensive and rigorous (albeit far more technical), but it costs £130 and is more for the specialist.

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I was one of the named executors of my father's estate, and I handled virtually everything myself, including the completion of the IHT400 account to HMRC and all of the supporting forms. I didn't use a solicitor at all, but I did get our accountants to check every aspect of my workings and they actually submitted the forms to HMRC as agent (it was a complex estate and I felt it would look better if it came from a large accountancy firm rather than me personally).

Thank you so much freetrader for taking the time to write that - fantastic info. I'm very sorry about your dad - I'm sure he'd be extremely proud of the way you handled everything. If I can do the same for mine, I know he'd be happier then leaving it handled by someone else.

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Never, never employ a Bank to do probate. A friend of the family's did it, and the estate was charged £25k+ for a third rate service.

It all depends on who is named executor in the will.

For instance a lot of solicitor firms will write themselves in as executor (with the deceased's prior permission of course).

This will lead to a future job for them at unspecified rates, even for a straightforward estate.

You would then be in the position of trying to change the executor if you wanted to administer it yourself. Hassle you don't need. It's Frugal's father's choice though, at the end of the day.

Edited by frankief

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It all depends on who is named executor in the will.

For instance a lot of solicitor firms will write themselves in as executor (with the deceased's prior permission of course).

This will lead to a future job for them at unspecified rates, even for a straightforward estate.

You would then be in the position of trying to change the executor if you wanted to administer it yourself. Hassle you don't need. It's Frugal's father's choice though, at the end of the day.

Agreed - but do insert a clause allowing your executors to take professional advice if they deem it appropriate and have the fees met out of the estate.......unless you really want to stitch up a mate who is probably doing you one last favour.....

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