Gifts to save on probate fees
Gifts to save on probate fees is the first in our series of posts on making gifts.
Many people arrange their affairs so their families can avoid applying for a grant of probate when they die and thereby save on probate fees.
How much could you save on probate fees?
At the moment, the charges set by the Probate Registry are relatively small. An application for a grant of representation costs a flat fee of £215. If you use a solicitor to make the application for you the probate fee is reduced to £155. If the value of the deceased person’s estate is less than £5,000 there is no fee to pay when applying for a grant.
Therefore, at least for the time being, there doesn’t seem to be much of a saving to be made but that situation could be about to change…
Background to probate fees
In the early months of this year we heard a lot about probate fees. The Probate Registry announced that probate fees would be increasing in May 2017 by as much as 9000% – no, that’s not a typing error!
Even quite modest sized estates would be charged a fee of several thousand pounds and some families would face paying up to £20,000 in probate fees. Not surprisingly, there was a lot of media attention given to the proposed increases. Many lawyers objected to the increase on the grounds that it was a tax without parliamentary approval.
Consequently, the government decided to put the fees increase on hold. But it’s widely assumed that the threat of a ‘death tax’ in some form has not gone away. The cost of probate fees could go up significantly at some point in the near future, whichever party is in government.
If, probate fees are going to be calculated based on the value of the assets in a deceased person’s estate, it’s likely there will be a lot more interest in making lifetime gifts.
Choosing assets to give to save on probate fees
Which assets should you choose to give away and who should receive them? These are not always easy decisions to make and there may be unexpected consequences to some choices:
- You might find later on that you need the asset you gave away
- Your relationship with the person you gave the asset to might change
- There may be taxation charges you hadn’t expected.
So where do you start? First of all it’s really important to have a properly researched plan for making gifts. Most people want to give away either their property or cash but other assets such as life policy proceeds could be given away that would be just as effective in saving on probate fees.
Later in this series of posts on making gifts I’ll be looking at the pros and cons of giving away particular types of assets.
Top Tips for making gifts to save on probate fees
Here are some tips on how to approach making gifts:
#1. Make a list of all your assets and grade them in terms of their importance to you – how easy would it be for you to live without them?
#2. Work out the cost of transferring the asset in terms of legal or financial fees and any taxes that would have to be paid.
#3. Decide whether you’re going to continue to get any benefit from the asset after you’ve given it away e.g. continuing to live in your house after you’ve transferred ownership.
#4. Find out if there is anything that would prevent you from making the gift e.g. if you need consent from a landlord or joint owner.
Above all else get independent professional advice before taking any action.
Ask us for an Asset Protection Audit – find out how best to protect family assets.
In the next post in this series I’ll be looking at giving your home away.
Rosamund Evans, solicitor TEP
Call me on 0115 7722129
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