Recently announced changes to probate fees are likely to have a particularly adverse effect on the farming community, says the head of Agriculture and Landed Estates at Lodders Solicitors, James Spreckley.
The government has recently announced significant changes to the way fees charged for issuing grants of probate are calculated. Grants of Probate are essentially a certificate issued to an executor of a will evidencing that the person has the authority to deal with the assets of a deceased‘s estate and are often required particularly when dealing with bank accounts and property.
To date, these fees have been no more than £155, but following a recent government consultation, the intention is to change the basis for charging fees so that it is linked to the value of the deceased’s estate, resulting in fees as high as £20,000 for those estates valued at over £2 million.
“Farmers and landowners with about 200 acres or more, are likely to find that their estates fall into this higher band and therefore may have to pay these increased fees,” says James, “and it should be noted that this money has to be paid, even if there is no inheritance tax liability because the farm and land qualifies for Agricultural Property Relief or the estate is passing to the surviving spouse.
“Farmers are often notoriously cash poor, even if they have significant capital assets and these fees will need to be found up front.
“Where assets are held in the name of the deceased, it may not be possible to deal with them without a grant of probate,” adds James. “This could cause a real issue if, for example, access to a bank account is needed or assets are to be sold, or merely to distribute assets or land to the surviving family members or other beneficiaries under the will. If these assets are critical to the farming business, then there will be an urgency to be able to deal with them to keep the business operating smoothly but funds for the fee will need to be found first.”
The charge will apply to each deceased’s estate so where for example a husband dies and his assets are to go to his wife, who dies shortly afterwards, there could be two lots of charges to be paid if things are structured in efficiently.
“Here at Lodders, we work closely with our clients across Warwickshire, Gloucestershire, the Cotswolds and the South West, to help plan their succession arrangements to try to ensure that their affairs are organised in as tax efficient a manner as possible, not least to try to ensure that farming businesses can be passed on with the least financial impact to the next generation.
“However, this change does mean that many farmers and landowners will need to revisit their inheritance planning to check how assets are held and if their estate is going to be caught by this change,” he adds. “In some circumstances, if assets are held in joint names, then ownership of the asset will pass automatically to the survivor and no grant of probate is needed, but this will not always be possible or appropriate; it would be a sensible exercise to see if this additional charge can be legitimately avoided at least on the first death.
“Succession and inheritance planning is important to all of us,” comments James, “but it is an issue of particular significance to landowners and farmers who often need to try to ensure that farms can be passed on intact for the continuing viability of the business, but this additional charge is not going to make this any easier to achieve.”
Lodders’ Agriculture and Landed Estates team is one of the largest and most experienced teams in the Midlands, and has consistently received the highest rankings and accolades from the law profession’s top guides The Legal 500 and Chambers UK.
Lodders is a premier law firm in Warwickshire, Cheltenham, the North Cotswolds, and Gloucestershire.