Keri's calm, matter-of-fact, problem solving approach to difficult circumstances was, and remains, incredibly reassuring. Keri became my rock at that time and it was to her I turned for guidance in both financial and family matters.
The Government has proposed a new tiered system of probate fees in England and Wales, based on the value of the deceased's estate.
Probate fees are due when the executor of an estate applies for a Grant of Probate. This is necessary to gather in estate assets and distribute them to beneficiaries as directed by the deceased's will. It can only be avoided where assets pass exclusively from one partner to another, or an estate is worth less than £5,000.
Currently, probate fees are £215 per personal application, irrespective of the size of the estate concerned. For applications made through a solicitor, the rate is set at £155. Under new rules proposed by the Government, the system of probate fees would change, to one based on the value of the deceased's estate.
Whilst the minimum level on which probate must be applied for will increase to £50,000, the proposed charge for estates of £2 million or more, will increase to a flat rate of £20,000 with no tiering. This will result in the Government increasing the proposed revenue from probate applications from £46 million to in excess of £300 million, seen by many as a stealth tax.
Whilst it is the case that for most of our clients, probate will be sought at some point, there are ways in which the estate can be legitimately reduced for probate purposes. Simple ways in which to avoid probate are:-
Use of trusts – As trusts are separate entities, the assets held within these are no longer owned by you and therefore do not require probate.
Gift assets away – As well as passing assets to those you wish to receive them, this can be an ideal way to reduce your estate for probate purposes. However, please ensure they have been truly gifted and that you are not retaining any benefit in them as this will not work.
Own assets jointly – If assets are held jointly, they automatically pass to the survivor on death and so do not form part of the estate for probate purposes. Care should be given to ensure that holding assets jointly is the most appropriate for other planning reasons. It should also be noted that assets passing jointly are still assessable for IHT purposes.
Ensure life policies are held in trust – we regularly come across circumstances where life cover is held but not placed into trust. Placing policies into trust ensures the assets do not form part of the estate and can be distributed much sooner.
Keep cash in smaller quantities – typically most banks or building societies will not require probate on accounts holding between £5,000 and £15,000. However, make sure that the accounts you are using are not all part of the same institution ie. Lloyds and HBOS.
Spend it – The best way of reducing your estate for probate purposes is to spend your assets! Through the use of the Lifetime Cashflow Forecast, we can help you to determine how much you can afford to spend based on the agreed assumptions.
If you would like to discuss any changes to your circumstances in light of these proposals, please get in touch.