'Death tax' rises will hit families hard

Updated
senior man comforting beautiful ...
senior man comforting beautiful ...



Huge rises in the probate fees that bereaved families have to pay the government will leave many people stuck in a cash-flow hole, experts warn.

Under the present system, executors pay a flat fee of £215 for probate, regardless of the size of the estate. However, the government is now consulting on plans to introduce a sliding scale that could see families being charged as much as £20,000 to wind up a £2 million estate.

Under the new system, probate would be free for estates worth under £50,000. But those worth £300,000 would incur a £1,000 charge, and those over £500,000 would be forced to pay £4,000.

The fee would be £8,000 for estates worth between £1 million and £1.6 million; £12,000 for estates between £1.6 million and £2 million; and £20,000 for an estate worth more than £2 million.

These costs are in themselves being described as outrageous - after all, it costs the government no more to process a multi-million pound estate than a tiny one.

As Emily Deane, technical counsel for the family professionals industry body STEP, points out, "Why does the fee scale differ so markedly from, say, Land Registry application fees and the Court of Protection application fees, which involve a similar administration processes?"

She points out that in many cases the fee could tip families over the edge into having to sell the family home.

"A common example of a cash-poor estate would be a surviving pensioner who has nominal cash available to pay the fee, particularly if cash has already been depleted due to nursing home fees, and he or she may be forced to sell the home, she says.

"There will also be farmers who are land rich but have very little cash and will be unable to produce the £20,000 or more from the estate. Children in their 20s and 30s may have been left the family home but will not have access to the £20,000-plus required in order to obtain the grant."

But an even bigger problem with these high fees is the effect they could have on the cash-flow of families and executors. In a Catch-22 situation, the estate can't be sold until probate is granted - and without the cash from the estate, many people won't be able to pay the fee.

In some cases, law firms will be willing to lend the money to executors - in others, though, bridging loans will be required, making the process even more time-consuming and expensive.

And, ironically, it's not at all clear that increasing the charges will actually raise more money for the Treasury. The better-off are likely to make sure that assets are in joint names, in which case probate isn't charged, or or give them away to family well before death.

And, points out John-Paul Dennis, a partner with law firm Kirwans, "These new rules may result in increased pressure from family members to transfer property many years before they expect to die, an act which would leave them extremely vulnerable financially in the final years of life, as well as, of course, meaning that the government may not be able to use the estates of older people to subsidise fees for things like residential homes, something that is certainly not in the interest of the state."

Election 2015: David Cameron Vows to End Inheritance Tax
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