The Ministry of Justice (MoJ) has recently confirmed that court fees charged for applications for a grant of representation after a death will be substantially increased later this year (May 2017), despite a public consultation that overwhelmingly opposed its proposed changes.
The good news, for the 58 per cent of estates in England and Wales that are worth less than £50,000, is that fees will no longer be charged on estates worth less than this new, raised, limit.
For administrators of estates worth more than £50,000, however, court application fees rise incrementally, peaking at £20,000 for estates worth more than £2million.
Under the new structure, court fees begin at £300 for estates worth between £50,000 and £300,000, rising to £1,000 for estates worth up to £500,000 and £4,000 for estates worth up to £1 million. Above this mark, fees range from £8,000 to the maximum level of £20,000.
Unsurprisingly, 810 of the consultation’s 832 respondents disagreed with the new fee structure, citing a number of reasons including the size of the proposed increases.
As the administrative costs of issuing a grant remain the same regardless of the value of the estate, such a large increase is widely viewed as a form of taxation by stealth.
Because administration fees are payable before probate is granted, if there is insufficient cash in the deceased’s bank accounts, the executors may even find it necessary to take out a loan, thus inflating the overall costs of administering probate.
But the MoJ is proceeding despite all objections and expects its proposals to raise an additional £250 million a year to “make a critical contribution to cutting the deficit and reducing the burden on the taxpayer of running the courts and tribunals.”
Substantially higher court fees are also likely to add further complexity to the task of estate planning and increase the use of trusts, which are already in widespread use as a means to reduce the size of an estate and by which assets can be released to beneficiaries in advance of the grant of probate.
Following these court fee hikes and the introduction in April 2017 of the main residence nil-rate band, it is now more important than ever to seek professional advice when planning your inheritance tax liability and drawing up your will.
For up-to-date informed advice contact Ursula Watt, Head of George Ide’s private client team, on 01243 786668.
Ursula Watt, partner and head of private client department
George Ide, LLP
Solicitors of Chichester and Bognor Regis