What is probate and what does it cost?
There are two ways to die in the UK; with a Will, and without a Will. If you are clever, you would choose the former. There is never a time when planning to die without a Will makes sense. But whether or not you have a Will makes a difference when it comes to the probate process.
If you have a Will, you will have named an “Executor“. This person has the responsibility to gather and secure your assets, and then distribute them according to the instructions in the Will. They also have responsibility to carry out all of the paperwork associated with your “estate” (everything that you owned when you died).
Imagine the day after you have died. Your Executor goes to your bank and explains to the bank cashier that they are your Executor, and that you would like all of the money from the account. The Executor may even have a Will.
Imagine the cashier obliges, and hands over the £50,000.
The next day, somebody else arrives at the bank, but they have a different Will, which names them as the Executor, and they want the contents of the bank account. Their Will is signed and dated after the other Will.
This person had already secured the money from a Building Society account across the other side of town.
It is this type of mess that is avoided by the probate process.
What is Probate?
Probate is the process by which your Will is accepted as your official, legal Last Will and Testament. It is an opportunity for people to challenge that Will. It is also the process by which your estate administrator is appointed, either as the Executor named in your Will, or as an administrator nominated by the courts if there is no Will. This person is given a court issued document that gives them the authority to act as your estate administrator.
The “Grant of Probate”
If you have died with a Will in place, the Executor named in your Will is given a “Grant of Probate”. It is this document that your financial institutions will want to see before they release the contents of bank accounts. If there is no Will, then a “Letters of Administration” is issued instead of the Grant of Probate.
A Letters of Administration is also issued if the Will is invalid for some reason (perhaps because it wasn’t signed correctly), there are no Executors named in the Will, or the named Executor is unable or unwilling to serve. A bank has no way of knowing whether a document is a legal Last Will and Testament. They have no way of knowing whether there is a challenge to the Will, or whether another one was written subsequently, that cancelled this one.
The legitimacy of a document is determined by the probate courts. Specifically, if there is more than £5,000 in an account, the bank will want to see either a Grant of Probate or a Letters of Administration before releasing the funds.
Applying for Probate
If you are the Executor of the Will, you can apply for Probate directly online. If there is no Will, you can apply for the Letters of Administration but there is currently no online form for doing this, and it must be completed by post (another reason, why dying without a Will makes things difficult for your loved ones).
You can use the online probate application if you are named as the Executor, and have the original Will (not a photocopy). You must also have an original death certificate (or interim death certificate from the coroner) and you have already reported the estate’s value to HM Revenue and Customs (HMRC). The online application requires that you have already submitted an Inheritance Tax (IHT) form to HMRC.
The cost of a Probate Application
It costs £215 to apply for probate if the value of the estate is more than £5,000. It’s free if the value is less. But this is simply the cost of the application assuming that your Executor is taking care of it themselves.
In November 2018 the government announced that it would be changing the flat fee structure for probate fees, and would move to a sliding scale. Which worked better for smaller estates (with estates up to £50,000 being exempt), but significantly more expensive for larger estates. This was to come into effect in April 2019, but the Brexit discussions put this on hold. We will try to update this post when the changes come into effect.
The new sliding scale for probate fees when they come into effect will be:
Less than £50,000: no fee Between £50,000 and £300,000: £250 Between £300,000 and £500,000: £750 Between £500,000 and £1 million: £2,500 Between £1 million and £1.6 million: £4,000 Between £1.6 million and £2 million: £5,000 £2 million or more: £6,000
Inheritance Tax (IHT)
Probate and Administration fees should not be confused with Inheritance Taxes.
The probate process accepts your Will as the official Last Will and Testament, and legally appoints your Executor as the estate administrator. Your Executor then has the responsibility to gather up your assets, pay debts, taxes and funeral expenses. A full value of the estate must be submitted to HM Revenue and Customs (HMRC), and taxes must be paid.
If the estate is valued at less than £325,000 there is no inheritance tax to pay. If everything above the £325,000 threshold is left to your spouse, civil partner, a charity or amateur sports club, then no inheritance tax is paid. Otherwise, everything above the £325,000 threshold is taxed at 40 percent. So for a £500,000 estate, taxes of 40 percent will be levied on the £175,000 above the threshold, meaning that there will be a total tax bill of £70,000.
Writing your Will
It is important to write your Will for a number of reasons.
Firstly, it allows you to make your Executor appointment. With no Executor appointment, the courts appoint your “next-of-kin” as the estate administrator. This may or may not be your first choice. The role of the Executor requires certain personality traits, attention to detail, the ability to work with bureaucratic processes and stamina. It is likely that you can think of a person better equipped to handle this role than your next-of-kin.
Your Will also allow you to include things like charitable bequests, which can reduce your inheritance tax burden.
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For initial advice about Estate Planning including Lasting Powers of Attorney, Wills, Trusts and Probate; call our team on 0203 488 7503, 01992 236 110 or contact us by email at legal@walshwestlaw.com or via our website www.walshwestcca.com
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