9,000% rise in death fees won’t just hit the wealthy

Beware the new cost of dying as Government increases admin fees by £1,000s

The cost of dying just soared (Getty)

When the Ministry of Justice (MoJ) confirmed a massive overhaul of the fees we pay to carefully manage the affairs of our nearest and dearest after they’ve gone this week, it was the big money the media focused on.

From May this year, subject to parliamentary approval, some estates worth more than £2m will be charged up to £20,000 in probate costs – the fee charged by the Government’s Probate Registry to cover the paperwork for handing on control of someone’s assets, including property, money and possessions after they die.

It’s a staggering 9,000 per cent leap from the £155 that had been charged to those applying through a solicitor or the £215 for those going it alone.

£2m worth of assets certainly sounds like more than most of us will ever have, but few realise that the new fees will operate on a sliding scale, meaning those with estates worth between £50,000 and £300,000 will be charged £300, those worth £300,000 to £500,000 will have to stump up £1,000 and those worth between £500,000 and £1m will have to find £4000.

The ministry claimed the “fairer, banded system” will mean more than half of estates will currently pay nothing and 92 per cent will pay no more than £1,000. “Fees are necessary to maintain an accessible, world-leading justice system which puts the needs of victims and vulnerable people first,” a spokesperson added.

However, with some studies suggesting that within the next 13 years alone the average property value in the UK will exceed £450,000, the very real prospect of a huge proportion of bereaved families being pressured into forking out large amounts (months before the deceased’s estate is settled and the money released) leaves an unpleasant taste in the mouth.

It’s no wonder that when the MoJ proposed the hike last year a staggering 97 per cent of respondents disagreed with the level of fees, not least because probate is a largely administrative function that doesn’t warrant that kind of charge. The Probate Registry is supposed to be an administrative body that breaks even rather than a source of extra revenue through what many legal experts are now calling stealth taxation at a time when HMRC is already seeing record levels of Inheritance Tax receipts.

In fact, the Government itself recently admitted that the Probate Registry covers its costs under the current fee system, particularly since staffing costs are falling year on year. Instead, the huge increase in fees will be used to subsidise the court and tribunals service to the tune of £250m a year.

“This dramatic increase in probate fees from May this year is yet another tax on death,” says James Ward, Partner and Head of Private Client team at Seddons. “For a process that is normally non-contentious, not typically requiring a hearing or any time in court it is likely to cause undue pressure and extra pain for bereaved families.

Alison Morris, Partner at Wilsons Solicitors LLP, says: “The work involved in processing and granting probate doesn’t increase when dealing with large estates, so such a huge increase is impossible to justify, outside of the desire to increase tax income from wealthy families.”

“There is little if any extra work involved in granting probate on an estate of £5 million than there is on a £50,000 estate.”

“It’s more than likely we will see a rush to the probate registries for grants to be issued in April before the new fees come into effect, which could cause delays issuing grants.”

“The Government also suggests that solicitors acting for executors should pay the £20,000 upfront on their behalf, and be repaid from the estate. That is simply unworkable and naïve – a lot of probate cases are handled by small firms that just wouldn’t have the cash flow to do that.”

Meanwhile, the rise in fees could have wide-ranging effects on ordinary people, experts warn, including older people giving away assets they wouldn’t normally have parted with in a bid to protect their families from the burden of cost.

“It is not difficult to foresee that these charges will lead to adverse actions taken by the deceased in succession planning,” Ward adds. “There is likely to be a dramatic increase in assets structured through jointly owned bank accounts and property owned as joint tenants to avoid the fees.

“This approach will not work in complex family situations such as second marriages and the result will be beneficiary dissatisfaction and a rise in disputes and litigation, straining the courts even further.”

“These plans have not been thought through properly by the Ministry of Justice,” Morris warns.