The new fee structure, set out in the draft Non-Contentious Probate (Fees) Order 2018, will see a new banded structure for probate fees linked to the value of the estate replacing the current flat fee that applies to all estates regardless of their value.
If you need to refresh your memory on what probate is, and why you need it, take a look back at a couple of the previous blog posts.
The proposed increased fees are set out as follows:
Estates from £0 – £50,000: £0.00
Estates between £50,000 to £300,000: £250
Estates from £300,000 to £500,000: £750
Estates from £500,000 to £1million: £2,500
Estates from £1 million to £1.6 million: £4,000
Estates from £1.6 million to £2 million: £5,000
Estates over £2 million: £6,000
The proposed fee system is set out in the draft Non-Contentious Probate (Fees) Order 2018 which is being proposed as a statutory instrument. Introducing this legislation as a statutory instrument means the proposed fees were debated by the House of Commons Delegated Legislation Committee (made up of a select number of MPs) last month who narrowly voted, nine to eight, to approve the draft order.
Having overcome this potential hurdle, the statutory instrument will now go before the House of Commons. It is very unusual for statutory instruments to be overturned by the House of Commons, and for that reason it is likely that the proposed new probate fees will be approved. There is no fixed date for when the House of Commons will consider the fee increase, though the Government has indicated that the new fees will be introduced at some point in April 2019.
Statutory instruments are traditionally used to introduce routine legislation often covering matters such as highways and planning matters. However, many commentators, including SFE and STEP, have correctly made the point that linking the fee to the value of the estate is similar to a tax on the estate. A potential fee of, for example, £5000 seems disproportionate for the relatively routine process associated with the issuing of a grant of representation.
It is a well-established legal principle that proposed tax rises are introduced through a Parliamentary Bill to be considered by both the House of Commons and House of Lords. The classification of the probate fees as a statutory instrument means the massive hike in fees has avoided the full scrutiny of Parliament.
It is clear that many estates will now attract much higher probate fees under the new regime. The problem for personal representatives is that they will need to pay the fee before they can access the deceased’s assets, as banks do not usually release funds before a grant of representation is issued. Whilst banks will often release funds to pay inheritance tax, it is not yet known whether any banks will extend this service to the payment of probate fees. This could leave personal representatives, or the deceased’s family, having to pay substantial probate fees from their own funds.
As highlighted by Hugh Lewis-Morgan in his recent SFE blog post (https://sfe.legal/probate-fees-then-and-now/) there is also the concern that elderly and vulnerable clients may feel pressured into the use of inappropriate trusts, lifetime giving and transferring assets into joint names in a bid to reduce their potential estate to avoid the proposed fees. These types of transactions could mean elderly clients giving up control of their own assets late in life. There are many risks associated with, for example, transferring the ownership of a home to other parties – even family members.
There is little action that can be taken at this stage, though the Government has confirmed that it will publish guidance on how to pay the fees shortly before introduction. It is difficult to speculate on the unpublished guidance, though - a system whereby the fee might be payable after the grant of representation has been issued, e.g. within a set time period, is one possible solution. However, there could, quite understandably, be some reluctance to allow personal representatives to receive the grant on a promise to then pay the fee due.
Alternatively, banks may well be encouraged to release funds to pay the court fee prior to the grant of representation being issued, though it would be difficult to require all banks to release funds. Whatever process is put in place to pay the fees, there will undoubtedly be frustration at a greatly increased cost associated with obtaining the grant of representation.
Individuals contemplating giving away their assets to potentially avoid the increased probate fees should always seek legal advice before committing themselves to transactions that could potentially lead to family disputes and problems with paying for care home fees.
“Litigation should be a last resort”
- Paragraph 8, Practice Direction – Pre-Action Conduct and Protocols
“This Practice Direction and the pre-action protocols do not alter the statutory time limits for starting court proceedings… If proceedings are started to comply with the statutory time limit… the parties should apply to the court for a stay…”
- Paragraph 17, Practice Direction – Pre-Action Conduct and Protocols
Claims under the Inheritance (Provision for Family and Dependants) Act 1975 are becoming more commonplace. However, a person wishing to make such a claim only has six months from the date of the grant of probate or letters of administration to do so. If they do not start their claim within this deadline (called a limitation period), then following a recent case in the High Court, there is now an even greater risk that they will be unable to do so.
The Court has discretion to extend the six-month deadline and the principles that the Court will take into account when excising this direction are summarised in the case of Berger v Berger  EWHC Civ 1305. In short, the Court must be satisfied that the delay in issuing the claim was justifiable and that there is a sufficiently good claim to allow it to proceed.
The very recent case of Cowan v Foreman & Ors  EWHC 349 (Fam) has cast doubt and raised concerns about whether or not the parties to such prospective litigation can agree between themselves that the six-month deadline should be “extended”.
If a limitation period in any claim is soon to expire, then it is common practice to agree what is known as a standstill agreement. A standstill agreement is a contractual agreement between the parties not to rely on the expiry of the deadline as a defence to the claim.
There could be several reasons why it would be worthwhile entering into a standstill agreement but the main one is to avoid the cost and expense of having to prepare and issue a claim, following which the parties are then committed to a litigious process which can generally only be brought to an end by the agreement of the parties or a decision by the Court.
A stand-still agreement enables the parties to negotiate and, much of the time, it is possible to agree a settlement without having to go to Court; something which the Court (certainly until this recent case) is keen to encourage.
Every practitioner will tell you that it is quite commonplace to agree to a standstill agreement, particularly in Inheritance Act Claims, where there are a lot of considerations to take account of and the parties may not have had the opportunity to explore all of the facts of the matter which may be relevant and enter into meaningful negotiations.
Furthermore, when issuing the claim, it is not a simple as just filing a claim form at Court, as it is in some other cases, which stops the limitation period from running. In Inheritance Act Claims, it is expected that all of the evidence and all of the facts of the case should be filed at Court with the claim when it is issued. This involves a lot of work and potential expense, particularly for complex cases, which may otherwise be avoided if the parties are able to agree on a settlement between themselves.
However, in this case, Mr. Justice Mostyn stated:
“I was told that to agree a stand-still agreement of this nature is “common practice”. If it is indeed common practice, then I suggest that it is a practice that should come to an immediate end. …I suggest that in no future case should a privately agreed moratorium ever count as stopping the clock in terms of the accrual of delay…”
This will no doubt raise concerns for practitioners, as it means that they will have a very short period of time to prepare the case in full ready for issue, in light of the risk that in the future, Courts will be considerably less lenient when it comes to extending the deadline to issue the claim in situations where the parties have entered into a standstill agreement. It also gives scope to more unscrupulous potential defendants to disingenuously enter into a standstill agreement and later oppose any application for an extension of the limitation period.
In the writer’s humble opinion, and as Mr. Justice Mostyn acknowledged, it is not the place of the Court to re-write the law in cases where Parliamentary intention is clear.
However, the relevant provisions in the Inheritance Act already provide for judicial discretion to extend the limitation period. There must surely be some scope to enable sensible parties, wishing to minimise cost, to attempt to agree on a settlement and avoid committing to Court proceedings in an already overly burdened Court system, and to enter into a standstill agreement without the risk of prejudicing their claim.
Having said this, the quotes at the start of this post make it quite clear that limitation periods are not affected by negotiations and whatever the parties agree, Therefore, following this case, if they do wish to enter into a standstill agreement, they will have to bear in mind the risk that the Court may refuse to give permission to extend the limitation period.
In reality, a close examination of the facts of this case shows that there is not a huge shift in the previous legal position: the limitation continues to apply, irrespective of the parties’ wishes and the Court’s discretion would need to be exercised in the future if a claim did need to be issued.
This particular case involved a relatively complex will trust arrangement where both parties were aware of the limitation period and had legal representation throughout. Mr. Justice Mostyn considered a 17-month delay in issuing the claim to be unreasonable.
In the writer’s opinion, a key aspect of this particular case and the basis for Mr. Justice Mostyn’s decision is encapsulated in his comment “… a moratorium privately agreed after the time limit has already expired should never in the future count as a good reason for delay”.
In this particular matter, the limitation period expired on 16th June 2017, a standstill agreement (set out in an email from the trustee’s solicitor) was agreed on 25th January 2018. The claim was not issued until 8th November 2018.
In summary, entering into standstill agreements may very well still play a part in cost-effectively resolving claims under the Inheritance Act. However, it seems that there is now a greater risk to Claimants in doing, so which may see a shift in practice to issuing a claim, fully prepared or not, and then seeking a stay of the proceedings. It will certainly be the case that if a standstill agreement is not entered into before the expiry of the limitation period that it will not be effective.
According to a survey commissioned by the life insurance company Direct Line, a quarter of British adults are now willing to challenge a relative's Will in Court if they do not agree with the terms of the Will.
In 2017, 8,159 caveats were entered in as contested Probate cases (this prevents Probate from being granted and the estate administered). The figure rose by 6% in 2018.
Direct Line says that caveats are being registered over whether or not a Will is legal, if the person who died had the capacity to make the Will and whether the person who applied for the Grant of Probate was the correct person to be doing so.
The seven most successful grounds for contesting a Will were found by Direct Line to be:
With the most common type of families being the co-habitee families’ inheritance is becoming increasingly likely either by a co-habitee who has not been provided for under the terms of the Will, a spouse or children or step-children.
By seeking the advice of one of our team at Cunningtons you can ensure that you are providing for those who you need to or wish to and we will ensure you have full knowledge and approval of the contents of the Will.
We will also be able to confirm your testamentary capacity and that there has been no undue influence placed on you to execute the Will.
We will of course also confirm your identity and oversee the execution of your Will so you can ensure it has been validly executed.
Bryony Wilmshurst of Cunningtons LLP is urging people to check their eligibility for a lasting power of attorney (LPA) fee refund, after almost two million people were overcharged by the Office of the Public Guardian (OPG) between 2013 and 2017. Claimants can expect to receive a refund of up to £54, with any accrued interested since the registration was made.
So far, only 200,000 of the 1.8 million people owed have claimed their refund, meaning that there’s £77 million still owed to customers.
To apply for a refund visit: http://gov.uk/power-of-attorney-refund.The exact amount will depend on when the registration was made, and claims must be made by 1st February 2021.
An LPA is an important document that gives a loved one the power to make decisions on your behalf when you can no longer do so. There are two types of LPA:
Recent research from the Solicitors for the Elderly (SFE) found that there are only 7% of LPAs in place across the UK, meaning that millions of people are currently unprepared for later life.
SFE urges anyone planning for their future to consider setting up an LPA and seek advice from a specialist lawyer.
Lakshmi Turner, Chief Executive of SFE, said:
“Whilst it’s comforting to know that people are making provisions by putting in place LPAs, millions of families, many of whom may have been going through a tough time with elderly relatives, will have been needlessly overcharged.
“It’s good to see the OPG addressing the error, and with the deadline for applications approaching, we’re urging people to check their eligibility for a refund soon.”
Head of Cunningtons' Wills and Probate department, Bryony Wilmshurst, said:
It will not be long before cohabiting couples become the most common type of family in the UK.
Following a recent Court of Appeal decision, when cohabiting partners or non-married or civil partnerships joint owners buy a property together they must contemplate and address the unthinkable: that their relationship might break down. Unless they determine at the time of purchase how they are to hold the property and what should happen in the event that they separate, they could potentially be facing a lengthy and expensive dispute.
If one party is contributing more of the initial purchase price or will pay a larger proportion of the mortgage, the parties should consider a declaration of trust setting out the proportions in which they hold the property and how the net proceeds are to be divided upon the sale of the property.
Many first-time buyers now receive help from their parents towards the deposit. If this deposit is not protected by a declaration of trust then in the event of a dispute between the owners the amount could be split equally between them. If you are a parent gifting your child a deposit towards their house purchase, would you wish this to be split equally between them and their partner in the event of a relationship breakdown? Cunningtons LLP can assist by preparing a declaration of trust setting out the proportions in which the parties own the property and registering this information with the Land Registry so that it is evident in the event of a dispute where the net proceeds of sale are to go.
Unmarried cohabiting partners should also consider what they would like to happen upon death.
Whilst we would recommend that everyone has a valid Will to ensure their estate passes in accordance with their wishes, this is particularly crucial for unmarried couples who wish to provide for each other and/or their partner’s children in the event of their death.
Under intestacy rules, the surviving unmarried partner does not benefit from the estate of the deceased. This can cause serious financial problems as well as significant emotional distress. The statutory rules of intestacy do not allow anyone other than your natural children to inherit upon your death, therefore stepchildren or your partner's children will not inherit if you have not made a Will providing for them.
Without a Will, the surviving partner will not be able to deal with matters following the death of their partner. For example they will have no right to arrange the funeral or have any input into the funeral arrangements.
A Will is vital to ensure your estate passes to those that you wish it to and to ensure that your loved ones are provided for in the event of your death.
By writing a Will, you can appoint executors who will have the responsibility for administering your estate in the event of your death and arranging your funeral.
A Will is also extremely important if you have children as this allows you to appoint legal guardians to look after your children in the event of your death.
Cunningtons can assist you by providing you with advice tailored to suit your needs.