Changes to probate charges could hit charities hard
All charities should be aware that planned increases to probate fees could affect the amount of money they receive from gifts left to them in wills.
What is the proposed change?
In November, the Government announced that probate fees would increase from the current flat rate of £215 (or £155 when applying through a solicitor) and instead be paid on a sliding scale depending on the value of the estate.
The planned change will abolish probate fees for estates worth less than £50,000, but will result in an increase for any estates worth more than this, with a rise of almost £6,000 for estates worth over £2 million.
How will it affect my charity?
When charities are left a share of the residuary estate they are entitled to the remainder of the estate after all costs and administrative expenses are settled.
Put simply, a rise in the probate fee will result in less residue to distribute to the charity.
The RNLI estimates changes to probate fees will cost it £400,000 a year. The RSPCA guesses the figure to be £250,000 and Macmillan £300,000.
Cancer Research UK has already said it expects the reforms to cost them in the region of £600,000 annually.
The Institute of Legacy Management warns that the changes could cost charities £10m in legacy donations every year.
When will the fee increases come in to force?
These changes were due to be implemented from April 2019. However, there has been a delay because of the amount of time that has been taken up by Brexit discussions.
The changes still need to be approved by Parliament – but no date has yet been set for this to happen. Assuming the legislation is approved, an order will be made and the new fees will come into force 21 days later.
The Government says it will bring the changes before the House of Commons as soon as Parliamentary scheduling allows it to do so.
What should legacy managers be doing in the meantime?
If you are notified of a residuary legacy and the estate falls in to a category where an increased probate fee could become payable then it would be wise to take action.
Consider pointing out the potential increase to the executors, it could affect other residuary beneficiaries too such as family members.
Where you can, offer reasonable assistance or signpost executors to seek assistance in order to promptly deal with matters to beat the probate court fee hike. The difference in turning around the probate application that bit sooner could save the residuary estate upwards of £5,000.
Conversely, if you are made aware that the estate is less than £50,000 then there may be cause to wait and apply for probate when the legislation is passed and the fee for this size of estate is reduced to nil. However, this decision should only be made if it is clear that the legislation will be passed imminently so as not to unduly delay the administration of the estate.
Below is a full breakdown of how much more you could pay after the rules change:
- Estates worth £50,000 up to £300,000 will pay £250, a rise of £35
- Estates worth £300,000 up to £500,000 will pay £750, a rise of £535
- Estates worth £500,000 up to £1 million will pay £2,500, a rise of £2,285
- Estates worth £1 million up to £1.6 million will pay £4,000, a rise of £3,785
- Estates worth £1.6 million up to £2 million will pay £5,000, a rise of £4,785
- Estates worth more than £2 million will pay £6,000, a rise of £5,785
If you need advice on legacies or in administering an estate, contact me directly via email@example.com or by calling 01752 203500.
Ranked in Chambers & Partners, The Legal 500, a full member of STEP, the Law Society’s Private Client Section and Solicitors for the Elderly, you can be assured you are in safe hands.
Matt Rose, partner