Inheritance Tax  

Wills, probate, IHT and what advisers should know

  • To understand what is important about IHT planning.
  • To learn how various tools can help with IHT planning.
  • To understand what advisers need to know post-Ilott case.
CPD
Approx.30min

Probate charges are paid to the government when someone dies and the executor of their estate gathers their assets to distribute to beneficiaries of a will.

The current flat rate fee of £215 (or £155 if using a solicitor) is set to change to one which is tiered based on assets.

The change will mean lower value estates are exempt from any charge, but the charge on estates which exceed £50,000 will increase – some quite dramatically.

People will need to consider how beneficiaries access the required funds to pay the probate fee, as until the probate fee is paid, the assets cannot be released, although some measures to help people access cash from the estate are being considered. 

One option for clients to help their inheritors is to 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.

Planned Probate Fees
Value of estatePlanned Fee
Less than £50,000£0
£50,000 to £300,000£300
£300,000 to £500,000£1,000
£500,000 to £1m£4,000
£1m to £1.6m£8,000
£1.6m to £2m£12,000
Above £2m£20,000

A will is not set in stone

When creating a will, it’s important to know that it does not unequivocally mean the distribution of your assets will be as you intended.

This was emphasised in highly publicised case before the Supreme Court this year. 

In 2007 estranged daughter, Heather Ilott challenged her mother Melita Jackson’s will after discovering she had left it entirely to charities. The district court awarded the daughter a "reasonable provision” of £50,000 from the estate.

In July 2015, the Court of Appeal granted Ilott an award of over £143,000 of her mother’s estate. The charities then challenged the decision and the case was heard at the Supreme Court on December 12.

The Supreme Court decided to overturn the Court of Appeal’s decision, and granted the daughter the £50,000 awarded at the high court.

Under the law of England & Wales we are not required to leave assets to certain family members or in certain proportions. This is known as testamentary freedom.

However, this case has highlighted that adult children have (under the right circumstances) the ability to make a claim on a parent's estate under the Inheritance (Provision for Family and Dependants) Act 1975. 

The act was created to make reasonable financial provisions for dependents and in the past has been focused on minors.

The Ilott case is a stark reminder that even after death our ‘loved ones’ have the ability to redirect our wishes – through deeds of variation and by using the 1975 Act – if the Court allows those who feel a ‘reasonable provision’ should have been made for them can make a claim to this effect.