How to beat the cost of probate
Many families do not plan ahead for unexpected costs of the probate process and the fees associated with it. Depending on the value of the estate these can often be in the tens of thousands. This causes problems when there is little or no cash in the estate, or when the primary asset is property. Families may have to take out loans or sell off assets to pay these sums.
But why is the cost of probate so high and what can I do to reduce it?
The probate bill is made up of the fees the government charge for issuing a ‘Grant of Probate’, and the costs solicitors or high street banks charge for managing the probate process on your behalf.
What does the government charge?
When someone passes away, their family have to apply for a document called a grant of probate, which allows them to take control of the estate. Currently, the administration fee for all estates worth over £5000 is no more than £215. However, from April 2018 the government has proposed replacing this with a new tiered system based on the value of the estate. It will range from £300 for estates under £300,000, £1000 for estates worth more than £300,000 and up to £20,000 for estates worth over £2 million.
What about the price of managing the probate process?
Currently, high street banks and solicitors have 88% of the market for dealing with probate. Both generally charge a fee that is a percentage of an estate. This can be anything up to 5%, so if you have an estate valued at £600,000, your probate bill could be up to £30,000.
Often, when naming a solicitor or bank as executor, we don’t appreciate how much that percentage will actually take from an estate. There may also be instances where the value of the estate increases significantly (such as house prices going up ). And we also don’t plan how that money will actually be paid, such as having the sell assets like property to pay the bill.
It is possible to renounce an executor appointment and find a cheaper alternative, however, this is another stress to handle during a grief-stricken time. It would be far better to take steps to reduce the overall bill before this point.
How to beat the cost of Probate
Putting together an estate plan with us can help you save money. Assets jointly owned between you and your spouse or partner can often be passed on without the need for a grant of probate. Alternatively, making lifetime gifts is another way to avoid fees as ownership of these passes immediately, avoiding the need for probate. However, the benefit of avoiding the probate cost needs to be weighed against the inheritance tax charge on these assets.
We can also fix the probate fee to no more than 1.9%. So using the scenario from above of an estate valued at £600,000, this would reduce the final bill down to £11,400, a reduction of £18,000.
Of course, the only way to completely avoid probate fees would be to spend all your hard earned wealth, so your remaining estate is worth less than £50,000. Although I am sure your family may not be most pleased with that idea!
Get in touch today if you’d like to discuss how you can reduce your Probate bill with our advisors, either by using our contact us form, calling 020 8619 0358, or emailing us at email@example.com.