The term ‘Probate’ can mean a number of things, but for the purposes of this article, I will take it to mean the process to apply for a Grant of Probate, the document required to deal with a deceased person’s assets.
The quick and easy answer to whether having a Will can avoid the Probate process is no. Probate is the legal process for dealing with the estate of someone who has died-with or without a Will. The need for Probate all depends on the size and nature of the assets. Usually, If the estate is worth more than £5,000, a Grant of Probate may be required.
When someone dies with a Will, the document is called a Grant of Probate and it will show the name or names of the Executors named in the Will. In the case when someone dies without a Will (Intestate) the document is called a Grant of Letters of Administration and this will show the names of the people dealing with the estate, called the Administrators. What the document does is exactly the same in both scenarios.
So just by having a Will in place, doesn’t mean that you can avoid the costs of Probate. However, the other benefits of having a Will far outweigh any downsides.
What is the Probate threshold?
Whilst strictly speaking the threshold is £5,000, most financial institutions have their own limits before which they will insist on a Grant of Probate. It’s hard to give a definitive answer to what the Probate threshold is because it depends on a case by case basis. Each bank and institution will have their own specific threshold, sometimes as high as £50,000
A few years back, banks and institutions had low thresholds set, however, in recent years most have decided to increase it, making it easier for the Probate process to be avoided.
What makes it even more complex is that each bank and institution will tackle the threshold in their own preferred way. For example, one bank may decide to base the threshold on the value of the whole estate, whereas others will only consider the actual amount they are holding.
This means that the executor or administrator has to complete a pretty time-consuming job. They will need to find where the testator money is being held and then work out whether the threshold is exceeded and therefore, if Probate is needed. What may appear to be a ‘simple’ estate may end up becoming more complex, especially if Inheritance tax forms also need to be completed.
Can Probate be avoided?
Only assets that are held in your name at the date of your death may require a Grant of Probate. You may, therefore, think it’s a good idea to just hand over everything you own to your loved ones in your lifetime. Whilst this sounds simple, it isn’t a good idea. Once you give something away, you have no interest or control over that particular asset. Family’s have fall outs, a loved one may die before you or the recipient may get into financially difficulty which means your ‘gift’ may be lost. In addition to this, gifts made within 7 years of your death are bought back into account upon your death to see if any Inheritance Tax is payable. This would only be relevant if your estate (with any gifts you have made within 7 years of your death) is worth more the £325,000, or in certain circumstances, £650,000
It is possible to give assets away, whilst still retaining control by using trusts. This is a very complex area with some potentially serious consequences, especially if you are considering gifting your family home. Please get in touch if you are thinking of making gifts of any nature to ensure you are fully informed of all implications.
Costs involved with Grant of Probate
The government has been considering increasing the Court Fee of applying for the Grant of Probate. The proposed increases are drastic and whilst the proposals have been put on hold, they have not been entirely dismissed. Please see below a breakdown of the proposed costs for the Grant of Probate (based on the size of the estate):
- £50k to £300k – £300
- £300k to £500k – £1,000
- £500k to £1m – £4,000
- £1m to £1.6m – £8,000
- £1.6m to £2m – £12,000
- £2m+ – £20,000
The current Court Fee for applying for Probate is £215 or £155 if applying through a Solicitor. However, your financial affairs should not be dictated by Court Fees; you should arrange your affairs to ensure your wishes are carried out in accordance with your wishes, and if necessary, in a tax efficient way.
Trusts could also have the added benefit of avoiding delays, costs and frustrations of applying for a Grant of Probate following your death. However, as stated above, the law surrounding trusts is complex and any benefits should be carefully weighed up with the costs and administration, that are also involved. The potential to save probate fees should not be the only factor you take into account.
What to do now?
If you are currently in the process of writing a Will and are considering making gifts, or are considering using Trusts, I would recommend seeking the advice of a professional. Gifting and Trusts are a very complex area and whilst you do not need to see a Solicitor, you should speak to someone who is regulated by either The Society of Will writers or The institute of Professional Will writers. This ensures you have the protection and support should you need it.
We hope you found this article helpful, you may find our previous blog, ‘can a Will be contested?’ useful.
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