30 August 2019
Increased probate delays can result in higher inheritance tax payments
The Telegraph recently reported that delays at the probate registries are resulting in some families being left with an increased inheritance tax bill. Losing a loved one is a difficult time, and understandably, the last thing you want to think about is tax. However, if you are an executor, delaying can prove costly.
The grant of probate is the legal document which allows the executors, the people named in the will to deal with the estate, to access assets. Assets are needed to pay the inheritance tax, which is due for payment six months after the date of death. While there is an instalment option available on assets such as property, you must still pay the first instalment within this six month period and interest then accrues on the balance. Late payments attract a significant penalty by way of interest charged at 3.25%. Some asset holders, such as banks and building societies, will be happy to release funds directly to HMRC to settle the inheritance tax before the grant of probate is issued. Others will require sight of the grant of probate before they allow executors to realise the assets.
Probate registries, which are responsible for issuing the grant of probate, have been experiencing delays for several months now caused by technical problems following the introduction of a new system earlier in the year. The problem has not been helped by the proposed introduction of new probate fees which represent a very significant increase from the current flat rate of £215 for personal applications and £155 for solicitor applications to a sliding scale of fees ranging from £250 to £6,000 depending on the value of the estate. These changes were supposed to take effect in April this year, although have been delayed, resulting in a rush of probate applications being made under the old system. The Telegraph reported that the Ministry of Justice advises that grants are taking four to six weeks to be issued. However, it can also take much longer which eats into your six month window for paying inheritance tax.
Before you can make an application for a grant of probate you need to value the assets and liabilities of the estate. These may include assets such as property, contents, bank accounts, shares etc as well as certain gifts made during lifetime. If appropriate, an inheritance tax account must then be submitted to HMRC setting out these details and the inheritance tax, or the first instalment, must be paid. HMRC will then issue a receipt which will allow the executors to apply for the grant of probate.
It can take a long time to gather all this information and complete the inheritance tax account, particularly if there are many different asset holders involved. If you have been named as an executor by someone who has recently passed away, although it may be the last thing you want to do, it is important not to delay.
We offer a free one hour probate meeting for executors where we can go through the process with you, with no obligation to instruct us. Our private client team is experienced in dealing with probate work and can assist throughout the process to gain the grant and administer the estate. Our team works flexibly, and can undertake the whole process for you, provide ad hoc advice if you feel confident working predominantly alone, or we can work with you, or your other professional advisors.