Posted in Probate
Being the world city that London is, changes to inheritance tax, which have gone largely unnoticed by the media, are set to have a considerable effect on many of its inhabitants. The new rules effective from May mean that those inheriting estates over £2 million will pay hugely increased probate fees of up to £20,000 following a proposal from the Ministry of Justice (MoJ).
Now, with the new rules about to come upon us only estates with a value under £50,000 won’t incur a charge. The changes will see a sliding scale of charges for probate fees. It had cost just £215 or £155 if you were assisted by a solicitor. Now though, an estate worth between £500,000 and £1m will attract a £4,000 fee.
It goes without saying that property owners in London and the South East will be hit hardest, and there could be consequences, which will affect many people in a hugely negative way. The legal media has suggested there could be pressure upon older people to give away assets in order to get out of paying the charges and there could be high risk measures being taken by elderly people, resulting in money not going to the correct beneficiaries.
As wills and trusts experts in London we are concerned about the effects of the changes, but there is little we can do. The taxation of people in this way is expected to land a huge windfall for the treasury and it is something we all have to reluctantly accept.
The fees up to £20,000 are hard to agree with, but unless paid, executors will not obtain the grant of probate to enable them to administer a deceased person’s estate. Also, estates would pay Inheritance tax on the fees, which are not deductible when working out the tax payable.
The real problem is for beneficiaries, who are asset-rich but cash-poor, having their lives badly affected by the need to raise such considerable sums to obtain probate. It also goes without saying that on many occasions, this will involve the expense of a bank loan to pay the fee until the home or other assets can be sold.
Of course, there will be those older people who feel pressurised to give away assets in their lifetime, to avoid the proposed charges. An answer to this could be a trust which might be advisable, but many will be unaware of this and could take ill-advised action.
It is also the case that some older people can rely on their children to act in their best interests, which could involve giving up personal control with some children finding themselves divorced or having financial difficulties, which could put the home then at risk.
Sadly, it is a matter which needs addressing for many and we hope those affected by these proposed changes take action and see a wills and trusts expert. Being involved in this area of law our wills and probate solicitor are well-placed to find the correct solutions for those impacted by this problem.
Planning what to do with our wealth cannot be left to chance, which is why wills and trusts and estate planning should be sought. Anybody wishing to know more can contact us at Pindoria Solicitors today.