Today the Ministry of Justice came another step closer to introducing their much maligned plan to introduce a vastly inflated tiered probate fee structure, which bears no relation to the actual cost of the process.
Despite the cacophony of condemnation from the press, the legal industry and the charity sector, the Delegated Legislation Committee chose not block the MoJ’s plan to introduce what many have described as a stealth tax. The MoJ want to present the fee as a cost of processing probate cases, but in reality the tiered structure, which penalises larger estates, is much more akin to a tax mechanism. That is a key issue since it means estates are effectively being double-taxed – once for inheritance tax of 40% above the nil rate band and then again through tiered probate fees. Raising additional revenues from personal wealth should be conducted in a transparent way through the tax system, not a back door fee hike.
The close vote which took place today saw those who champion the introduction of the tiered structure win by just one vote. Although the issue could still drag on further, today’s result makes it ever more likely the probate fee hike will get passed.
Although the reform will take some estates out of the probate fee system altogether, larger estates could pay far more than the true cost of administration. We calculate the rules could unfairly force grieving families to pay, in some cases, 28 times more than they currently do.
The good news is that although these changes will add further complexity to estate planning, there are still plenty of steps people can take to plan ahead. Using trusts can help reduce the value of an estate for inheritance tax purposes, meaning a lower charge will apply. People concerned about how beneficiaries will pay the probate fees could leave sufficient funds in a life insurance policy, and provided the policy is written in trust, it can be accessed immediately on death, without the need for probate.