Tuesday, 06 November 2018 09:51

Financial Planners brand new probate charges ‘extortionate’

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Parliamentary Under Secretary of State for Justice Lucy Frazer MP Parliamentary Under Secretary of State for Justice Lucy Frazer MP

Plans unveiled by the Ministry of Justice last night to change the way probate is charged have been branded “extortionate” and a “stealth tax.”

The MoJ revealed it is continuing to pursue a banded structure for probate fees in an announcement last night.

Financial Planning firm Quilter expressed concern that “while the detail remains unclear, they’ve specified fees will never be more than 0.5% of the value of the estate – however, 0.5% can still end up as a substantial cost.”

Under the system a £250,000 estate would pay nearly six times more than they do today at £1,250 and a £500,000 estate will pay over 10 times more at £2,500.

   

Rachael Griffin, tax and Financial Planning expert at Quilter, said the changes would make estate planning more complex and suggested using trusts to help reduce the value of estates for Inheritance Tax purposes.

Attacking the new Government proposals she said: “The probate fee fiasco of last year has started to fade from public memory.

“After keeping tight-lipped they have now revealed they are pressing ahead with a tiered structure.

“While the detail of the charges are yet to be revealed, the change will still mean a heftier sum for those with larger estates.

“The replacement of the flat rate probate fee of £215 (or £155 if using a solicitor) will likely mean people with large estates will face extortionate fees and with property values at historically high levels the number of estates falling into a top band are likely to be quite high.”
 
She added: “Their announcement includes reassurance that the money raised will be spent on running the courts and tribunal service.

“However, that still means that people, particularly those at the top end, will be paying disproportionately for the administrative work involving probate.

“So, despite the reassurances, it’s hard not to see this as a stealth tax on those who already pay Inheritance Tax.

“Easing the burden on lower estates and lifting 25,000 annually out of probate is admirable, but it still means for others they will face a steep fee during an emotional and challenging time.”

Chartered Financial Planner Keith Churchouse, director of Chapters Financial Planning, called the change “tax by another name.”

And Chartered Financial Planner Dan Atkinson, head of technical at EQ Investors, added: “The current flat fee system is fair because the amount of work isn’t directly related to the value of the estate.

“I can see the argument being put forward that the Court Service needs investment, but the way this is met should be proportionate and fair.

“It’s good that more lower value estates are taken out of this fee (currently probate fees apply for estates over £5,000), but the fees that have been proposed bear more resemblance to a tax than a proportionate fee based on the amount of work required.”

Launching the new system Parliamentary Under Secretary of State for Justice, Lucy Frazer, said: “This new banded fee model represents a fair and more progressive way to pay for probate services compared to the current flat fee and reflects our commitment to protecting access to justice by ensuring we have a properly funded and resourced courts system.

“We are also confident these fees will never be unaffordable.

“The cost of the fee is recoverable from the estate and executors have several options to fund it.

“Moreover, the Lord Chancellor retains a power to remit a fee if he considers there are exceptional circumstances.”

 

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Last modified on Tuesday, 06 November 2018 10:28
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