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23-02-2016

The Ministry of Justice is consulting on proposals to reform the fee payable for an application for a Grant of Representation (Grant). At the moment such fees are fixed at either £155 or £215 on any estate worth more than £5,000. Under the new proposals, some estates will attract fees of £20,000.

The plan is to move to a banded fee while raising the threshold below which no fee is payable. Anyone with an estate worth more than the £50,000 threshold will pay more than at present, with fees starting at £300 and rising to a maximum of £20,000 for an estate worth more than £2 million.

The reason given for the proposals is to raise an extra £250 million for the courts service but how can this be justified? The process of obtaining a Grant is the same irrespective of the value of the estate. No more work has to be done just because the estate has a higher value.

The rise in fees could also create a potential catch-22 situation for personal representatives (PRs) of an estate. Depending upon the type or value of the assets in the estate, the PRs cannot unlock them or sell them until they have a Grant. Unless banks agree to release funds to pay the Grant application fee before the Grant is issued (as they do with funeral costs), PRs could find themselves in situations where they cannot get hold of the deceased’s cash needed to get the Grant, the Grant being needed to release the cash.

In addition, in estates where inheritance tax (IHT) is payable, the tax has to be paid before a Grant application can be made. While most banks will release the deceased’s cash to pay HMRC directly so the PRs can apply for the Grant to release or sell the remaining assets, paying the IHT can (in many circumstances) use up most, if not all, the liquid assets. This could be a massive stumbling block, particularly when you bear in mind that a great number of people are property rich and not cash rich. It may result in PRs having to take loans to get the Grant.

The proposed increase in fees for those who already have an IHT problem is likely to see those who would be affected ensuring they diligently carry out IHT planning in their lifetime or deal with the ownership of their assets in such a way that a Grant is not needed on death. If the Treasury starts to see estate values drop and therefore a drop in revenue from IHT at 40% or a drop in the number of Grant applications, I anticipate they may be quick to re-think this.

This briefing is intended for general information only and should not be considered as giving advice in relation to any individual case nor be taken as applying to any particular case. No liability is accepted for any such use of the information contained here

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