New Probate Fee System Draws Fire From Across the Board
The new hike in the probate fees system, which is set to raise probate fees to as high as £6,000, has drawn heavy criticism from numerous quarters. Some critics have claimed the move is an abuse of constitutional powers and by the government, and others label the price hike as a ‘stealth death tax’. The new fees system, even though it qualifies as a tax schedule, could have drawn far less outcry if the hiked prices weren’t pegged as high up on the scales. The move is facing a heavy push back from professional bodies of accountants, legal practitioners and financial experts, also from charities and house of Lords committees. The fact that this fee increment is being instituted without the budgeting processes raises suspicions about the government’s willingness to submit the fee hike to proper scrutiny.
According to critics, the fees, instituted by the government to help bankroll the dispensation of justice to the tune of £150 million, is an uncanny tax on wealth. Since the new fee system is based on the size of an estate, compared to the flat rate of the old fee system, the new fee system is tantamount to a tax schedule, and taxes must be subjected to scrutiny by parliament before it is implemented. And since the cost of administering an estate is roughly equal across all estate sizes, the new probate fee model might have no bearing on the costs of processing a probate application in most cases.
The bereaved are required to pay the monumentally increased fee upfront before they can even raise money from an inherited estate by either selling it or presenting it as collateral for loans. This represents a potential drawback for benefactors who inherit land but don’t have cash.
The fees are as high as £6,000 for estates worth £2 million-plus, while estates worth £300,000-£500,000 attract a £250 fee.
What’s even more unsettling about the new price system is that it is being implemented on the heels of a recent move by to government provide an allowance that exempts most homes from inheritance tax. In essence, the government is giving with one hand and taking much more with the other. In cases where the bereaved are exempted from paying inheritance tax, they still need to pay much higher fees for probate registration in order to have their names placed on property titles.
But the move could backfire and cause the government to lose a lot of inheritance tax, as most people may deploy trusts to prevent probate fees. Most people may opt to pay to set up trusts during their lifetimes in order to prevent the need for probate when they die. It is believed by experts that such trusts usually don’t pay the proper taxes required for probate registration.
Most people may also opt to take advantage of the the survivorship rules of joint property and bank account to pass their properties to loved ones upon death without a will. This excludes the value of such properties from the value tagged on the estate during probate application.
There’s also bound to be a rush by probate applicants to complete the probate registration process before the new fees are rolled out.
But these ways of going around the new probate fees also come with their risks. People who gift their properties during their lifetime to avoid probate may risk facing financial challenges. Those who turn to survivorship rules also risk family feuds upon death, as there might be contentions about how the property is distributed among the benefactors when there’s no will to determine that.
However, in defence of the new tax system, a source from the Ministry of Justice has disclosed that the new system will exempt an additional 25,000 estates from probation fees each year. The new fee system increases the threshold for exemption from £5,000 to £50,000. The source also emphasized that the fees are vital sources of resources which courts and tribunals must use to provide justice and protection to vulnerable members of the society.