It is widely acknowledged that cuts to the Ministry of Justice budget have resulted in a creaking court system. The family courts are under particular strain. Cuts to the Legal Aid budget have filled the courts with litigants in person – people appearing without legal representation – who cause delays as they are unfamiliar with court procedure and bring cases without merit.
The government has proposed raising funds by increasing the fees required to obtain a grant of probate. The government has proposed replacing the £155 fee for a grant of probate, with a tiered charging system. Under the new system, there will be no fees if an estate is worth less than £50,000 (in my experience it is rare for a grant of probate to be required in an estate of this low value). Above £50,000, the fees start at £250 and rise with each value band. At the top band, for estates worth in excess of £2 million, the fee would be £6,000.
Lucy Frazer, the Justice Minister, said that increased fees were necessary for “protecting access to justice by ensuring we have a properly funded and resourced courts system”. These proposals are at the time of writing awaiting approval by the House of Commons.
The Law Society has said the fees represent a “stealth tax” but the measure is unlikely to face full parliamentary scrutiny.
Why is this topic appearing in the Farm & Country section? It is expected that the estates of deceased farmers will be unfairly hit. Farms of around 150 acres with a farmhouse can be valued at £2 million. Farming families are prone to live frugal lives, and while they may be asset rich, income can be tight. As agricultural solicitors, we see many farming businesses would run at a loss every year if it were not for the cash boost of the Basic Payment Scheme subsidy. Currently, farming families do not have to pay inheritance tax due to agricultural property relief. The new £6,000 charge will however present cash flow issues for some families already burdened by a bank’s overdraft.
Is a grant of probate always needed? It is needed to sell or transfer shares or land. Banks and other financial institutions may ask to see it when releasing significant sums of money.
A grant of probate is not usually needed where land or bank accounts are owned in joint names. Banks will often release smaller sums without a grant of probate. Life insurance policies will in some circumstances pay out the policy proceeds without it.
There is a fear that farmers will take rash steps to put property in the names of the next generation before they die, which could have bad results from a tax planning and personal finance point of view.
While some farming families will want to take steps to arrange their affairs to avoid having to apply for a grant of probate, they should tread carefully and take legal advice before doing so.
Contact a member of our Private Client Team for more information and advice.