Controversy over new Probate fees schedule

From April 2019, some estates in England and Wales could be required to pay almost £6,000 for a service that currently costs less than 4% of that amount. This is because of a proposed change to the fees families must pay to administer the estate of someone who has died. This process, more generally referred to as probate, involves gathering the assets of the deceased, valuing the estate, paying any tax and bills, and distributing the estate according to the Will.

At the time of writing (Feb 2019), obtaining the document needed to carry out these tasks – called a grant of probate in England and Wales – costs £215, or £155 if you apply through a solicitor but there’s no fee if the estate is under £5,000. However, the Government has announced plans to restructure the way the fees work, which would see some estates paying significantly more than they do now.

What’s changing?
Instead of the current flat rate, the proposed system sets fees on a sliding scale based on the value of the estate, as shown in the following table:

Value of estate before inheritance tax Fee
Up to £50,000 or exempt from requiring a grant of probate £0
£50,000 – £300,000 £250
£300,000 – £500,000 £750
£500,000 – £1m £2,500
£1m – £1.6m £4,000
£1.6m – £2m £5,000
Above £2m £6,000
Source: Secondary Legislation Scrutiny Committee, 21/11/2018

This seems like a large increase to fees for larger estates but the costs are considerably lower than similar proposals put forward in 2017, which would have raised fees to as much as £20,000. The earlier proposals did not pass through Parliament before the General Election in June 2017, and were withdrawn as a result. The current version of the proposals, with lower fees, was then announced in 2018. It has been approved by the House of Lords and is now set to go before the House of Commons before potentially becoming law in April 2019.

Stealth tax or necessary reform?
The Government has said the banded structure is fairer than the current system, arguing that those who can afford to pay more should pay more. As the threshold at which no probate fees are due would be raised from £5,000 to £50,000, it also means an extra 25,000 households a year won’t have to pay any fees at all. The Government said the money raised by this change would provide funding for other parts of the courts and tribunals system, and “ensure an efficient and effective service”. However, as fees at the top end of the scale are much higher than the cost of funding the probate service, some have questioned whether this is an acceptable use of the Government’s powers to raise fees. This point was raised by a House of Lords committee in November 2018, which said “to charge a fee so far above the actual cost of the service arguably amounts to a stealth tax and, therefore, a misuse of the fee-levying power”.

The probate process explained
Karen Starkey
, private client solicitor at KWW, says that fees aside, probate can be a lengthy and often complicated process if you’re carrying it out alone. “If you’ve been named as the executor in someone’s Will, there are a number of stages to complete even before you apply for a grant of probate, and several more after you’ve obtained one,” said Karen. “Appointing a professional to act on your behalf can make this process easier and ensure it is completed accurately. If you’re dealing with a particularly complex estate, specialist expertise can save you a lot of money.”

Alternatively, if you choose to administer the estate yourself, you’ll need to carry out the following steps:

STEP ONE: Find out if probate is needed
Before you begin, make sure you’re clear on what you’re required to do. Not every estate has to go through the probate process, so this is the first thing to check. You may not need probate if the person who died only had savings or premium bonds, or if their property and money was all jointly owned – this will automatically pass to the surviving owners.

STEP TWO: Value the estate and report it to HMRC
One of the main duties of an executor is to work out and report the value of the estate. This can be a significant task but it’s important to complete it accurately to avoid facing a fine from HMRC. First, you’ll need to find out about the assets and debts the person had by contacting organisations such as banks, pension providers, utility companies, mortgage lenders and credit card provider. You’ll also need to know the value of the person’s home and possessions, as well as any life insurance payments and certain gifts they made in their lifetime. According to HMRC, valuing an estate usually takes between six and nine months for an individual to complete but it can take even longer if the estate is large or complicated.

STEP THREE: Apply for probate
Once you’ve estimated and reported the estate’s value to the Revenue, you can apply for probate. You can do this online if you’re the executor, and you have the original will and death certificate.

STEP FOUR: Pay inheritance tax
If inheritance tax is due on the estate, the forms relating to it need to be sent within a year of the person’s death, and you’ll need to pay all tax within six months of the death. You can request paying inheritance tax on certain assets in instalments but you must settle the bill in full once the asset in question is sold.  You can start paying this before you finish valuing the estate. It’s best to do this as soon as possible as HMRC will start charging you interest if you don’t pay by the deadline.

STEP FIVE: Collect the estate’s assets
To access financial assets of the person who has died, send a copy of the grant of probate to the organisations that hold them. You can ask for them to be transferred to an agreed executorship account.

STEP SIX: Pay off any debts
As well as any tax due, you’ll need to ensure any remaining debts are paid.To protect yourself from unclaimed debts arising later on, you can place a notice informing creditors of the death in The Gazette.

STEP SEVEN: Keep estate accounts
Throughout the process, keep a thorough record of the property, money and possessions owned by the person who has died and how they will be split. This must then be approved and signed by you and the main beneficiaries.

STEP EIGHT: Distribute the assets
Once all the debts and taxes have been paid, you can distribute the estate according to the person’s Will. It’s a good idea to obtain a signed receipt from each beneficiary of the estate when they receive their inheritance, to include in the estate accounts. Be aware that beneficiaries might have to pay income tax if they inherit assets that generate income for them, while the estate may also have to complete a trust and estate tax return to report any income it receives while it is being administered.

Changing a Will after someone has died

Sometimes the generosity of a friend or relative leaving you a gift in their Will can backfire if it turns out your estate will need to pay tax on it or if there is a chance it could be swallowed up in future care costs or in satisfying some other type of claim. It may also be the case that a Will prepared many years ago does not take advantage of new tax allowances on death, such as that which now applies when you leave a share of your home to your children or other descendants. To cater for these sorts of situations it may be possible for the provisions of a Will to be varied to better suit your needs or to ensure tax efficiency where possible.

Karen Starkey, Wills and probate lawyer with KWW Solicitors, explains: “If you have been left a gift in someone’s Will and you are worried that as a result the value of your own assets when you die may be pushed above the rate at which inheritance tax becomes payable, then it is a good idea to talk to a solicitor about the possibility of varying the Will to divert your inheritance to someone else.

“It is also advisable to seek advice if you are starting a new relationship and are anxious to protect your inheritance in case the relationship breaks down, or if you and others named in the will are keen to make provision for people not currently provided for, such as grandchildren of the deceased who were born after the will was prepared.”

How can a Will be varied? 
To bring about some changes, such as to benefit someone who is not currently named in the Will, you can simply give away some of your inheritance. However, before doing this you will need to consider whether there could be any adverse tax consequences, such as liability for inheritance tax arising under the potentially exempt transfer rules if you die within seven years of the gift being made. The other option to effect a change is via a formal legal document, known as a deed of variation. Which option is right for you will depend on the circumstances but there are formalities that need to be complied with for a deed of variation to be effective. To avoid any adverse inheritance or capital gains tax implications, a variation Will need to: 

  • Be made within two years of the deceased person’s death
  • Be recorded in writing
  • Make it clear how the Will is being varied, ie the nature of the gift you are foregoing and who you are passing it on to
  • Be signed by you, as the original beneficiary 
  • Not involve any reward from your point of you, ie not be made in return for you receiving some other benefit in lieu of you giving up some of your inheritance. 

It is important to take legal advice to ensure all formalities are complied with, particularly where the variation is to be made by deed given that arrangements cannot subsequently be changed. 

Who can make a variation? 
It is possible for anyone who stands to benefit under the terms of a Will to seek a variation. It is also possible in some situations for the executors or personal representatives of the deceased person to suggest a variation is made. There are additional requirements where the variation being considered will increase the estate’s tax liability or where beneficiaries under the age of 18 will be affected. 

What about intestate estates? 
If you stand to inherit under the intestacy rules because your relative failed to make a Will, then it is still possible for you to make a deed of variation to give away some or all of your inheritance to someone else. 

If you have received an inheritance which you are not sure you want to accept, or if you have some other reason for wanting to vary the terms of a will or the rules of intestacy, please contact Karen Starkey for advice on your options.

Can I just refuse to accept my inheritance?
Whether you have been left an inheritance through a Will or the rules of intestacy you are entitled to decline to accept it but if you do this you will have no right to then dictate who should benefit instead. If you are uncomfortable about this then it might not be the way to proceed. 

The contents of this article are for the purposes of general awareness only. They do not purport to constitute legal or professional advice.The law may have changed since this article was published. Readers should not act on the basis of the information included and should take appropriate professional advice upon their own particular circumstances.  

Health and welfare power of attorney

A health and welfare lasting power of attorney is a legal document which allows you to appoint people you trust to make decisions about health treatments and personal care for you if you lose the mental capacity to make such decisions for yourself. Karen Starkey, of KWW Solicitors, explains how this document gives your attorney the power to make decisions, on your behalf and in your best interests, in regard to things like eating, washing, medical care, where you should live, or whether to continue life-sustaining treatment.

The exact decisions they can take for you will depend on your instructions. For example, an attorney can only consent to or refuse life-sustaining treatment on your behalf if you specifically state this.You can give your healthcare attorney power to refuse medication or particular types of treatment, such as:

  • Cardiac resuscitation after a heart attack
  • A blood transfusion, for example if you do not want one for religious reasons
  • Electroconvulsive therapy.

Your healthcare attorney is not allowed to refuse treatment for you if:

  • You have the capacity to refuse the treatment for yourself
  • The treatment is prescribed by the clinician in charge after you have been sectioned under the Mental Health Act – the only treatment your attorney has the power to refuse in such circumstances is electroconvulsive therapy
  • It is an emergency situation and the treatment is considered life-saving – unless you have made it clear that life-saving treatment should be refused.

A healthcare and welfare attorney cannot make decisions about your finances, business affairs or property matters. If you want an attorney to do this, you would need to make a separate property and financial affairs lasting power of attorney.

When does it come into force?
Health and welfare attorneys will only start making such decisions for you if you lose mental capacity. This may happen due to mental health problems, a brain injury caused by an accident or a stroke, alcohol or drug abuse, a learning disability, or as a result of a condition such as dementia.  Under the Mental Capacity Act 2005, you would be judged to have lost mental capacity if you are unable to:

  • Understand the information relevant to the decision
  • Retain that information
  • Use or weigh that information as part of the process of making the decision
  • Communicate your decision, whether by talking, using sign language or any other means.

There is a two-stage test which must be applied to decide whether you have mental capacity. This involves asking:

  • If there is an impairment of or disturbance in the functioning of your mind or brain? And if so:
  • Is the impairment or disturbance sufficient that you lack the capacity to make a particular decision?

Your family or carers will usually be responsible for deciding if you have mental capacity in everyday cases.  For example, a formal assessment by a healthcare professional will not be required to decide whether you are able to dress or cook for yourself. Where more complex decisions are involved, such as consent for surgery, a doctor or healthcare professional will decide whether or not you have capacity to consent.

It is your attorney’s duty, as far as possible, to help you make your own decisions. The law is clear that assumptions made about your lack of capacity cannot be based on your age, appearance or condition. Just because you are incapable of making one kind of decision does not automatically mean you cannot make other types of decision – this needs to be assessed on a case by case basis. It is a good idea to get advice from a specialist solicitor to guide you through the process of making a power or attorney. They can advise you on selecting the right attorneys, talk you through the sorts of decisions that might be required if you lose mental capacity, and outline your options to ensure that your wishes are known. They will also ensure the form is completed correctly and is legally valid. 

If you need help with setting up a health and welfare power of attorney, please contact Karen Starkey on 0208 979 1131 or email k.starkey@kww.co.uk.

This article is for general information only and does not constitute legal or professional advice. Please note that the law may have changed since this article was published.


Will disputes: How they happen and what we do

The number of Wills being contested by the children of a deceased parent is going up. We see two main reasons for this: the increasing number of second marriages, and children of the first marriage being excluded from the Will; and the rise in the number of parents making a Will when they do not have the mental capacity to do so. There is a link here with the rise in dementia cases. Dementia sufferers can have good days and bad days, and their memory for things that happened years ago can be stronger than their recall of what happened 10 minutes beforehand. The swings in a dementia sufferer’s capacity poses obvious problems for us lawyers when assessing whether they had capacity when they made their Will.

If a person suffering from dementia does not understand the nature of making a Will and its implications, when it has been explained, then the document will not be valid and their Estate will be distributed in accordance with any previous valid Will or the Intestacy Rules. Because a person is assumed to have capacity at the time they execute their Will unless proven otherwise, any child contesting their parent’s Will must show their parent did not have capacity.

There is no English law which states that a parent must leave their Estate to their children and, accordingly, if the Will is rational and there is a valid explanation as to why a parent has excluded a child, it is often difficult to succeed with contesting the Will. The law states that for a Will to be valid, the following must apply:

• The parent must have known and understood they were making and executing a Will
• The parent ought to consider any claims against the Estate i.e. if a child is being excluded whether they may have a claim at a later date
• The parent must understand the extent of the property they are disposing
• The parent must not be subject to any disorder of the mind as shall “poison his affections, pervert his sense of right or prevent the exercise of his natural faculties” i.e. the dementia has not progressed to such a stage that it affects their mind
• The parent must have the mental capacity to make decisions which take into account the relevant property, persons and circumstances and to arrive at a “rational, fair and just Will”.

To address the above points, solicitors advising malcontent children will focus on:

• Whether the parent understood the information about the decisions to be made
• Whether the parent was able to retain that information in their mind
• Whether the parent was able to weigh up the information as part of the decision process and that they communicated their decision.

If, having gone through all the points listed above, there is still a concern the parent did not have capacity, the next steps are to collect evidence to support the case.

Solicitor’s File of Papers
It is important to note the instructions given by the parent to the solicitor, the reasons the Will was drafted and whether the solicitor was put on notice as regards any capacity issues. If a solicitor is on notice that there are issues relating to capacity, it is sensible for that solicitor to have the Will witnessed by a medical expert or a note on the file confirming that a medical practitioner has confirmed that the person had capacity. However, even if this step is not undertaken, it doesn’t mean the Will is invalid.

Medical Records
When looking at a parent who has executed a Will while suffering from dementia, a solicitor will review the medical records to determine:
• When the dementia was first diagnosed
• Any reference to the parent being confused
• Whether the parent had a mini mental state examination (MMSE test).
The MMSE test is a guide only: it does not examine in detail an individual’s ability to understand, retain, weigh up or communicate information directly related to a specific question.

Witness Evidence
In addition to family and friends, it is important to obtain evidence from individuals who have nothing to gain from the litigation and are seen as being “independent”.

Medical Report
Having obtained all the above evidence, it is normal practice to then instruct an appropriate medical expert who specialises in testamentary capacity and patients suffering from dementia. The evidence of a medical expert is often key to whether a child is successful in contesting a Will, so great care should be given to the instructions.

The above is for guidance purposes only. Contesting a Will where a parent has suffered from dementia can be extremely emotional, time-consuming and costly. It is therefore important to obtain legal advice at an early stage.