Probing probate

Britain’s inheritance tax and probate system are so complicated that one in 10 families are spending over 100 hours sorting out the estate of their loved one after they die.

The findings of a review ordered by Chancellor Philip Hammond revealed that 38% of people who don’t use an adviser spend more than 50 hours administering an estate. And a further 12% of bereaved families are forced to spend more than 100 hours. Part of the problem is that the form-filling is excessive — even where there is no tax due.

Probate to become easier

However, the system should become simpler following a raft of recommendations in a report by the Office of Tax Simplification, an independent arm of the Treasury. The main recommendation is that the Government should introduce a fully integrated digital system for inheritance tax.

However, it acknowledges that this will take time and suggests the introduction of ‘a very short form for the simplest estates’ and a general simplification of forms should take place in the meantime. The report also says that the whole process needs streamlining and ask for a better system in place.

The report highlighted that having to pay inheritance tax before you get your inheritance is baffling. There are other strange deadlines set. For example, the current rules state that any inheritance tax should be paid by six months from death. Yet the form deadline is after 12 months.

HMRC failings were also highlighted. For example, HMRC doesn’t acknowledge receipt of forms or payment, leaving families in limbo as to whether they have followed the correct procedure. The review also pinpoints that there are many inconsistencies in the official Inheritance Tax guidance – and recommends rewriting it.

A sting in the tail

While this is all positive news in helping bereaved families with what is already a very difficult time, there are higher fees on the horizon for securing probate.

Fees charged for probate, which allows legal control over a deceased’s estate is currently fixed at £215 — or £155 for families who use a solicitor.

But the Government plans to link fees to the size of the estate from April. Under the proposed new system, estates valued at more than £2m will now pay £6,000, while those worth between £1.6m and £2m will pay £5,000 and those between £1m and £1.6m £4,000.

Estates worth between £500,000 and £1m will have to find £2,500 while those in the £50,000 to £300,000 price bracket will pay a more affordable £250. Those valued at less than £50,000 will be exempt, compared with the current and lower threshold of £5,000.

It is estimated that one in five families who pay fees will need to find at least £2,500. Aside from the soaring costs, executors will also have to pay the fee up front before reclaiming it from the estate once probate has been granted. Some families will be left with no choice but to borrow to be able to foot the bills.

Photo by Álvaro Serrano on Unsplash

Article is accurate at date of writing.