Before the assets in an estate can be distributed, one is required to obtain a document known as the Grant of Probate – without which a Will cannot be executed. But as you may already be aware, nothing in this world comes for free and a price must be paid to receive this all-important document.
For estates whose valuation is below the probate threshold which is set at £5000, the present cost of obtaining a Grant of Probate is £215. If a person hires a solicitor to file an application for the Grant of Probate, the cost is reduced to £155.
The cost varies depending on the size of the estate. And for those estates which exceed a certain level of lavishness, probate fees are expected to rise to as much as £20,000. Owing to this spike in probate fees, the treasury is expected to receive a windfall gain of at least £1.5 billion.
According to the revised rates, for estates not exceeding £300,000, the minimum applicable probate fees would be £300 whereas for those estates whose valuation exceeds £2 million the probate fees can be as high as £20,000.
Moreover, probate fees must be paid along with other taxes before the assets get distributed amongst the beneficiaries. While this amount may not be a huge sum for estates which have sufficient funds, it can pose to be a big problem if the only asset included in the estate is the family home. In these cases families are often forced to take out loans or to sell assets in order to pay for probate fees.
|Probate Fees Payable
|£50,000 and up to £300,000
|£300,000 and up to £500,000
|£500,000 and up to £1million
|£1million and up to £1.6million
|£1.6million and up to £2million
|More than £2million
How Ownership Affects Probate Fees?
A Grant of Probate is not usually required for bank accounts, family homes or other assets that are held jointly and therefore they can be passed to a surviving spouse without obtaining a Grant of Probate.
While owning assets jointly can be an excellent way to avoid probate fees, it may not prove to be of much use when one considers it from an inheritance tax point of view. When an asset is held jointly, the testator has no option but to gift it to the surviving spouse which may not always be according to the wishes of the deceased.
Creating a Living Trust
Avoidance of probate is the most commonly cited reason for establishing a Living Trust. It is the best alternative for those who consider probate to be a difficult, lengthy and costly process. By creating a Living Trust one can avoid the financial hardship that the loved ones of a deceased can be subjected to owing to Probate.
The costs involved in obtaining a Grant of Probate and passing it through courts is one of the biggest drawbacks of a Will. Whether you hire a solicitor to write the Will for you or make use of a free Will kit, the time taken to clear Probate is same for each type.
The Probate fees can be as high as 10 percent of the estate’s total worth before outstanding debts are paid off. This money paid as probate fees can be better utilised by paying for funeral costs and trustees fees.
Assets included in a Living Trust are considered to be separate from the remainder of the estate and as a consequence they are not subjected to Probate.
It is worth remembering that exclusion from Probate is granted only to those assets which are transferred into the Living Trust by the testator while he or she is still alive. Any asset which is transferred to the Living Trust after the testator’s death will be treated differently.
However, creating a Trust and transferring assets to it can be a time consuming process and therefore one must carefully evaluate whether the benefits actually outweigh the efforts.
The simplest and most straightforward way to avoid the probate process is to spend so much from your estate that its value falls below the Probate threshold of £50,000. Besides avoiding probate, another advantage of becoming a spendthrift (only for the sake of avoiding probate fees) is that you will finally enjoy your life by doing fun things with your hard earned wealth.
The motivation for most of us to create a Will is to make things simpler for our loved ones after we pass away. If you are contemplating and wondering how you can prevent your family or loved ones from the perils that lie ahead in the probate process, you should be glad to know that there are several things that you can do to bring down the estate’s worth below £50,000 in order to skip the Probate process altogether.
You can make gifts during your lifetime or create trusts to reduce the value of your estate below the Probate threshold. You can make further enquiries on the subject by getting in touch with an Estate Planning specialist.