Update on probate court fees and changes to inheritance tax

Increase in court fees for grants of probate

You may be aware that due to the government calling a snap election, the proposed increases have been put on hold for the time being.

Record Inheritance Tax bills and how the new rules may affect you 

The tax year 2015/16 saw a huge increase in the revenue generated by inheritance tax for the Treasury. The total amount raised was £4.7 billion, an increase of 22% over the previous year.  House price rises, especially in London and the South East, have been the main reason for the increase as well as increases in the value of other assets eg shares.

In addition, the level of the nil rate band (the threshold over which inheritance tax is payable ) has been the same for the last 8 years, currently £325,000.

In April this year, new tax rules came into effect that will reduce some of the inheritance tax payable and we have reported on this previously: the residential nil rate band.  However, the full amount of this allowance does not kick in until 2021 and certain conditions must be met to qualify for it.

Careful estate planning to minimise the tax payable on death is therefore advisable. At Catchpole Law we specialise in giving advice of this nature. There are steps that can be taken quite legitimately to minimise the amount of tax payable ensuring that as much as possible can be passed on to the family instead of the Treasury.

Increase in court fees for grants of probate

You may be aware that, despite widespread opposition, the government proposes to increase the fees for the application of a grant of probate from May this year.

What is this fee?

When someone dies, the value of their estate is calculated and where appropriate inheritance tax (IHT) is payable. Once IHT has been paid, the executors of the estate apply for the grant of probate.  The grant is the executor’s authority to deal with the deceased’s estate and is needed to dispose of investments and property etc.

The fee to apply for the grant is currently £155 when applying through a solicitor and £215 for a personal application. These fees are the same and regardless of the value of the deceased’s estate.

The proposed new fees will be based on the gross value of the deceased’s estate as follows:

Value of estate Proposed fee
£50,000 to £300,000 £300
£300,000 to £500,000 £1,000
£500,000 to £1 million £4,000
£1 million to £1.6 million £8,000
£1.6 million to £2 million £12,000
More than £2 million £20,000

These increases, which are subject to parliamentary approval, are obviously huge. Many estates may struggle to find the cash to pay them.  If you are dealing with the administration of an estate, you should try to apply for the grant as soon as possible to avoid the increases.

If we can be of assistance, please contact us.

 

 

Intestacy Rules reminder

We thought we would follow up on an earlier article as a reminder of the Intestacy Rules. The example we give below highlights how important it is to put in place a Will.

 

By way of an example, husband dies leaving a wife and two children under 18. He owns a house in his own name worth £375,000 and has savings worth £100,000.  The mortgage on the house is covered by an insurance policy and so the total estate is £475,000.  He had been thinking about making a Will and had expressed the wish that the whole of his estate should pass to his wife but if she had died before him, a trust for the children with capital passing to them at age 30.  Unfortunately, he never got around to doing a Will and on his death the Intestacy Rules were applied:

 

  1. The wife gets a legacy of £250,000 which is less than the value of the house. She also gets the contents of the house and any car which her husband owned.
  2. What is left is divided in half. The wife gets one half.
  3. The other half will be held for the benefit of the children on what is called statutory trusts until they reach 18.

 

On the figures given in the example, the wife does not get the whole of the value of the house. This is all very different to what the husband intended – namely that everything went to his wife.  He was also thinking of putting the house into joint names with his wife, but did not get around to doing it.  Had he done so, this would have made life easier for the wife as his widow.

 

If you would like advice on putting in place a Will or on how to hold your property in joint names, contact Michael Catchpole or Tamasine Hankey at Catchpole Law.