New Probate Fee Could Cost Inheritors £20,000
Beneficiaries could be forced to take out loans in order to cover probate fee charges after proposed changes.
After someone dies, the responsibility of dealing with their finances often falls on a person who is under-prepared.
Executors need to obtain the grant of probate to distribute assets and arrange the paying of bills and taxes. Unfortunately, as Sarah Phillips, partner at Irwin Mitchell Private Wealth states, “a lot of people think that addressing their financial affairs as described, is predicting their demise, so will put it off.”
At the moment, probate is generally required if the deceased person did not write a will and has savings, property or shares worth over £5,000.
How Much Will It Cost You?
Under the proposed plans, estates valued at between £1.6m and £2m will have to pay £12,000, those worth over £2m will be made to pay £20,000.
Only estates valued under £50,000 will be totally exempt from the charges planned by the Ministry of Justice.
Asset-Rich, Cash-Poor Worst Hit By New ‘Tax’
Law firm Irwin Mitchell label the proposals as being effectively a new tax, adding that “individual beneficiaries, who are asset-rich but cash-poor, would be badly affected by the need to raise such considerable sums to obtain probate”.
The changes could also lead to unfortunate consequences, with “the risk is of many older people living in houses now owned by their children who don’t always act in the best interests of their parents.” As Sarah Phillips points out, people will feel pressured to divide their assets before their death.
Ways To Avoid It
There will still be ways to legally avoid paying the full charge, such as using trusts to keep money in and establishing those living together as tenants in common, where people own separate and distinct shares of the same property.