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An overhaul of probate charges could present a new stumbling block for executors

Many people trying to plan their inheritance for spouses and children breathed a sigh of relief when the government announced the ‘Family Home Allowance’ in 2015. The phased reduction in Inheritance Tax on homes will culminate in complete exemption on family homes valued at up to £1 million by 2020. This change in inheritance tax, whilst popular with many middle income families who have seen the value of their homes rise significantly, will close down one revenue stream for the government. So no real surprise then that there is a proposed increase in probate charges on the horizon – out goes the flat fee of £215 on estates over £5,000 and in comes a new, complex tiered system which will undoubtedly create more problems for executors.
 
Not everyone of course would lose out to these two changes in inheritance tax regulations and certainly those inheriting from small estates will feel the benefit. The executors and administrators who are dealing with lower value estates won’t need to calculate inheritance tax at all and estates valued below £50,000 would not be liable for any probate charges. The costs and difficulties rise as soon as the estate increases above £300,000 with a new proposed probate charge of £1,000, nearly five times the current level.   Estates valued at £2million and above will see a maximum probate charge of £20,000, representing an increase of more than 930%. Worryingly for executors these probate charges would have to be paid up front, before grant of probate and the full release of estate funds, or executors could face penalties.
 
The proposed change in probate charges presents yet another stumbling block for executors who are already liable for any mistakes they make in the management and distribution of an estate. The money for funeral fees, insurance and often a proportion of inheritance tax already has to be paid for prior to full grant of probate. With the addition of higher probate fees more executors may be forced to take out a loan to cover costs.  Banks and building societies are finally starting to acknowledge the chicken and egg problems associated with probate. Last year many confirmed that they will now release more funds from deceased banks accounts without full grant of probate but figures vary considerably between banks.
 

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