|Ministry of Justice Proposes Application Fees Reform in E&W|
The Ministry of Justice (MoJ) has issued a consultation paper with its proposals to reform application fees for grants of probate in England and Wales (E&W).
The probate application fee is currently GBP155 if made by a solicitor and GBP215 if made by an individual due to the extra work involved for the court for an individual's application. The government proposes to discard the flat fee system and introduce a fee that is proportionate to, and rises with, the value of the estate. Currently, there is no fee payable for an estate valued up to GBP5,000 and this exemption will be increased for estates up to the value of GBP50,000. The government estimates that this will exclude an additional 30,000 estates from paying the application fee increasing the proportion of estates paying no fee to 57 per cent.
However, the following application fees would be increased, as shown below:
The same fee is applicable whether it is made by an individual or a solicitor.
The government has assessed that 84 per cent of estates would be exempt or pay GBP300 and 94 per cent of estates would pay GBP1,000 or less. The maximum fee of GBP20,000 would only be paid by estates valued at GBP2 million or more and the fee will never exceed 1 per cent of the value of the estate. The government has also assessed that these changes will raise an additional GBP250 million which will reduce the deficit and the burden to the taxpayer. The additional funding will assist the courts and tribunals in moving from a paper-based system to an online system which will be more user friendly for the executors and will enable applications to be made online.
'Help with Fees'
HM Courts & Tribunal Service (HMCTS) currently operates a remission scheme for those who are unable to pay the fee. The applicant must meet certain criteria to qualify for the exemption which is called 'Help with Fees' which includes applications for a grant of probate. The consultation proposes that the Help with Fees scheme should no longer apply to probate applications, although there may be exceptional circumstances when a remission is granted.
The executor is responsible for making the payment for the grant of probate application and the most common method of payment is to access funds in the deceased’s bank accounts. Most banks are obliging for payments of funeral costs, probate fees and inheritance tax to be made prior to the grant of probate being obtained. In some scenarios, however, there may be limited cash funds available to the executor and the equity may be tied up in property. This could also be problematic for solicitors who have been employed by the executors and do not have the requisite cash available to pay the application fee prior to liquidation of the assets. In these cases, where there are insufficient funds the government are advising that the executors apply to a bank for a bridging loan to finance the payment of the application fee, using the estate assets as security.
The government announced in the Summer Budget of 2015 that they will introduce an additional nil-rate band (NRB) of up to GBP175,000 when a main residence is passed to direct descendants on death. The additional NRB, on top of the current GBP325,000 available, will be phased in from 2018 in the following way:
GBP100,000 in 2017 to 2018
GBP125,000 in 2018 to 2019
GBP150,000 in 2019 to 2020
GBP175,000 in 2020 to 2021
Any unused proportion of the NRB will be transferable to a spouse or civil partner. There will be tapered withdrawal of the additional NRB for estates with a net value of more than GBP2 million. Following this new measure, the government has assessed that the additional inheritance tax relief available from 2017 will outweigh the proposed increases to the probate application fee.
The opinions expressed do not constitute investment advice and specialist advice should be sought about your specific circumstances.
Published on our website on Feb.23, 2016