The government has announced that it will drastically increase probate fees from May 2017.
The current fee of £215 is levied to cover the administration costs involved in granting probate. Future fees will now be tiered. The administration costs do not vary significantly depending on the size of a person’s estate, so to implement such a tiered structure, will penalise larger estates.
The new tiered structure will mean lower value estates will be exempt from any charge, but the charge on estates that exceed £50,000 will increase, as per the table below
Those with assets above £1 million will be hardest hit by the increase, seeing the probate fee jump to between £8,000 and £20,000. For estates over £2 million, it is an increase of 9,000%.
The probate fee is not an optional charge people can choose to pay; it can add up to 1% in fees on the value of an estate.
Both the probate fee and any inheritance tax (IHT) charge need to be paid before the assets can be released.
A key planning requirement for many people will be to ensure their loved ones have enough money to pay the probate fee, as their beneficiaries will be unable to access their inheritance until it is paid. People who have beneficiaries that are not cash rich may struggle to find the available funds to pay the probate fee, which could add further concern and complexity for beneficiaries.
A quick solution
Setting up a life assurance policy is a simple way of ensuring beneficiaries have enough money to pay the probate fee. Providing the policy is written in trust, it can be accessed immediately on death without the need for probate.
If the probate fee is £20,000, a policy written in trust that will pay beneficiaries that amount on death will mean the funds are available, and probate is not delayed.
For more information and how this can apply to you please get in touch