Home » Wills, Trusts & Probate » Death & Taxes – what does it really mean?

It was Benjamin Franklin who that said that nothing can be certain except death and taxes.  As a private client lawyer, I can certainly agree with the first part but sometimes you can do something in relation to the taxes but one needs to know all the options.

Recently proposed legislation proposed by the Conservative Government was set to introduce in May a punitive indirect tax in the form of increased probate fees.  Although the planned increases were shelved in the wake of the general election being called, only time will tell as to whether a successive Government will reintroduce this fee or not.  Until the proposed increases, the standard probate fee was £160.00 across the board irrespective of the value of the estate except for an estate under £5,000 which was free.  It must be remembered that probate fees reflect payment for an administrative process carried out by the Probate Registry.   In simplistic terms, someone’s Will and their Executor’s Oath, which testifies that it is the person’s last Will, is sent to the Probate Registry.  If the Probate Registry is satisfied that all legal requirements have been satisfied, then a Grant of Probate is issued.   As can be seen, this is purely an administrative process.

Under the proposed increases, if an estate was worth over £2,000,000, then the administrative fee would increase to £20,000. Similarly for an estate between £1,600.001 and £2,000,000 it would be £12,000. It may, therefore, initially seem to be a tax on the well off but when you consider the increase in probate fees for an estate worth between £500,000 and £1,000,000 is increased to £4,000 then it is possible to see how it relates to many of the population when you take the value of a home into account.

It is possible, especially between spouses or civil partners, to re-arrange affairs so that everything is in joint ownership as joint tenants so that the estate passes on the first death by survivorship to the surviving spouse without the need to obtain Probate.   This may, indeed, work to avoid probate fees but it may not achieve the best result if you wish to put an asset into a trust or protect against nursing home fees with a life interest trust.

In addition to the publicity surrounding probate fees, there has been a lot in the news recently relating to an increase in the nil rate band where the family home is passed down to direct descendants.  So far so good.  But what happens if you have step-children or, indeed, no children, or if you have put assets into a trust, or given the house or the proceeds from the family home away during your lifetime? These, generally, will not qualify as passing to your issue and therefore you could be missing out on the value of the increased nil rate band.  By way of confirmation, the existing nil rate band is still set at an individual allowance of £325,000 with the ability to transfer the nil rate band if it has not been used when the first spouse or civil partner dies.  In this case, it can then be increased to £650,000.  If you do comply with the rules in relation to the residence nil rate band, then this can be increased, on the first death by £100,000, or, on the second death, by £200,000.

As ever, these matters are not as simple as the papers may wish you to believe and, therefore, the best way to proceed is to seek professional advice so as to make sure that your wishes are carried out against a backdrop of conflicting tax legislation rather than relying on information garnered by listening to soundbites in the press.

At Rudlings Wakelam we are committed to assisting you in looking at your options so as to ensure your wishes are carried out whilst minimising tax or probate fees which may be payable.

For further information, please contact any of our offices to discuss your concerns with Death and Taxes.