The Ministry of Justice announced earlier this month it will pursue a banded structure for probate fees.
The current system sees a flat fee of £215 paid for all estates of more than £5,000 (or £155 for those applying through a solicitor), but the MOJ had said last year it planned to replace this with tiered charges ranging from £300 to £20,000, depending on the value of the estate before inheritance tax.
The charge will be calculated on the whole estate of a deceased person prior to the deduction of inheritance tax, and will include jointly owned assets.
No fee will be payable on estates below £50,000, but a probate fee of 0.5 per cent will now apply on estates valued at more than £50,000, with a cap of £6,000 for estates worth more than £2m.
The MoJ claimed the fee increase, which had been put on hold before the general election after causing an uproar, was necessary to fund the work of the courts and tribunals.
National adviser LEBC warned the move would mean approximately 230,000 families a year would have to pay more to access their loved one’s assets.
Kay Ingram, director of public policy at LEBC, said: "Solicitors tell us there is no difference whatsoever in the work required based on value, so the extra charges cannot be justified on grounds of cost.
"Many solicitors presently pay the fee up front and recover it later, but it is unlikely they will be able to do so once the fees increase. This change constitutes a tax on the bereaved, and we expect many families to face financial difficulties as a result."
She said executors already found applying for probate burdensome and overcomplicated, and the MoJ fee hike would only add to the difficulties faced by bereaved families.
The probate increase comes on the heels of the government's review of inheritance tax, the first part of which was published by the Office of Tax Simplification last week.
The review is designed to make the system less complicated and last week's report recommended the government should move to a fully digital system for inheritance tax.
Jane Berney, business law manager at the Institute of Chartered Accountants in England and Wales (ICAEW), said the higher probate fees were "disproportionate" to the service provided as more and more services are being automated at a lower running cost.
She said when the MoJ first consulted on changes to probate in 2016, 97 per cent of respondents were against them.
She also noted the parliamentary joint committee on Statutory Instruments (SI), made up of MPs and peers, had reviewed the proposals and concluded they were unlawful.
She said: "They said pushing through the increases by SI was beyond the powers of the Lord Chancellor, as the increase was equivalent to putting a new tax in place as the fees were disproportionate to the service provided.
"Probate will become largely automated, not quite as simple as paying for your car tax but nevertheless all online, and currently costs £40m to run. This drastic increase in fees is expected to raise £150m to pay for running the MoJ. As the new fees are effectively a tax on wealth, they should be subject to the right scrutiny, like any other tax."
Alan Chan, director at IFS Wealth & Pensions, said: "It is absurd and is just another tax on the deceased’s family members, hitting them hardest at the most difficult time of their lives. Inheritance tax of 40 per cent is already quite high, and now individuals also need to factor in potentially significant probate fees too.
"For most people living in London, properties values alone will take them into the higher brackets of probate fees. Even if costs have gone up, it’s hard to justify a near 20-fold increase in probate fees overnight."
Ms Ingram warned unless the executor of a will obtains a Grant of Probate, assets of the estate cannot be accessed, which means they are effectively frozen at the time of death.
"Without ready cash to pay these fees, many will be unable to access their inheritance until they can raise funds. This could mean families failing to collect savings owed to them or taking on debt to do so," she said.
Ms Ingram said clients should take certain steps to safeguard their families from the worst impacts of the 'new tax'.
These include:
- Reviewing life policies to ensure they provide adequate funds for dependents and are written in trust;
- Updating pension plans as these too do not form part of the estate and can be left to family members outside of the estate, thereby circumventing both probate and inheritance tax;
- Ensuring there are adequate funds in joint bank accounts or that each adult has access to cash savings of their own, to cover 6 to 12 months’ spending;
- For younger families, under state retirement age, making a claim for State Bereavement Support at the earliest opportunity.
Kusal Ariyawansa, chartered financial planner at Manchester-based Appleton Gerrard, said: "As a percentage of the estate these additional charges can be deemed insignificant. It is yet another tax, meaning it should come off the final IHT bill, if there is one. There is no surprise that IHT is the most detested tax and its reform (abolition) is long overdue. It is nothing but a jealousy tax."
A spokeswoman at the MoJ said: "The new probate fees scheme is intended to ensure that those of limited financial means are not prevented from bringing proceedings in court because they cannot afford to pay the fee. For those who qualify for help under the scheme, the fee may be reduced or waived in full."
She declined to comment on the suggestion that 230,000 families could be affected by the fee hike.
Venilia Batista Amorim is a freelance writer for FTAdviser
