Are there really plans to bring in a ‘stealth tax’ that means probate fees could rise by up to 9,200%? It seems so. And this could bring additional hardship down on those who are already grieving and having to deal with the estate of their deceased loved one.
At the moment, probate fees are £215. This is a flat fee that is due on any estate worth more than £5,000. However, the new rates that are potentially being introduced could mean that the lowest probate tax that will be paid is £300, and this is on estates worth between £50,000 and £300,000. The rate is to be set at £20,000 for estates in the region of £2 million or more.
And although it may seem as though it is only the ‘rich’ who will have to pay such high costs, with rising property prices more and more people are being pushed into the higher bands. It is suggested that the government could raise over £250 million every year from these new tax rates, and the Department of Justice’s justification behind it is an increase in the administration behind probate since estates are often larger – and growing – and take more time to process. But is that £250 million going to go towards paying staff?
Despite the increase, it is estimated that 30,000 beneficiaries will not have to pay anything as they estates they inherit will be between £5,000 and £50,000. Under the current system they would have been liable for £215.
The new plans mean that there will be a 40% rise for estates between £50,000 and £300,000 (currently £215 this will rise to £300). For estates between £300,000 and £500,000 it is a 365% rise (£215 to £1,000). Estates between £500,000 and £1 million will see a 1,760% rise (£215 to £4,000). Estates between £1 million and £1.6 million will pay a 3,621% rise (£215 to £8,000). Between £1.6 million and £2 million it is a 5,481% rise (£215 to £12,000). And for anything over £2 million it is a 9,202% rise (£215 to £20,000).
The government in the UK has been undeniably busy of late, with plenty of upheavals to deal with – but that doesn’t mean that it hasn’t had the chance to take a new look at the many unclaimed assets and estates that occur each year when someone dies and there is no one to inherit the property, money, or possessions that belong to them.
A new body, the Independent Commission on Dormant Assets, has been set up and it is looking into where the ‘spare’ money should go, and how it should be apportioned.
The previous scheme was set up in 2008, and it was called the Dormant Bank and Building Society Accounts Act 2008. It meant that if, after 15 years, a bank or building society account had not been accessed, the money in it could be sent to good causes. The new scheme is about to be realised, and it differs from the 2008 one in a number of ways.
It is suggested that there is over £1 billion worth of ‘lost’ accounts in the UK – that includes savings, stocks, share, and bonds as well as pensions. This is after the Dormant Assets Scheme has already released £750 million, and passed on to various charities across the UK.
The new scheme seeks to make the process easier and quicker, ensuring that the money is sent to charities within the shortest possible time frame. But some are concerned that this means rushing through the process, and not allowing enough time for people to claim their money.
So how do these accounts become lost? It could be that family members have no clue as to the account’s existence once their loved one dies (not having a will is a major cause of this), and it therefore sits untouched for years. It also happens when the post is not redirected after a move, when a name is changed after a marriage, and when banks and building societies merge, or close down altogether.
Superstar singer songwriter, Prince, died in April in what we now know was an accidental overdose of pain medication. The problem – amongst many – was that no will was found to deal with his $300 million estate.
Now at least five half siblings as well as his full family have laid claim to the estate, and more still have suggested that Prince told them they would be left something in his will. But since there was no will, difficulties have occurred.
The judge in Minnesota who is presiding over this case has said that he is in no hurry to have it settled. Judge Kevin Eide, Carver County district judge, wants to ensure that he has all the facts and all the information before he has to make a final decision. There is a lot of money and many claimants to sift through first. And that’s not to mention the coterie of attorneys and lawyers who are working on behalf of Prince’s estate – there are at least two dozen of them.
Judge Eide has suggested that he might have to pass the parentage question – ie, who is actually related to Prince, and who is only saying that they are – to a higher court as DNA testing will most likely be used to determine who is who. This of course will make the process take even longer.
Before an estate can be executed correctly, it needs to be valued. And it is one of the executor’s jobs to do the valuing. It is especially important to get this right if the will of the deceased person dictates that a certain percentage of the estate must go to someone – it would not be possible to work out how much money that is exactly without knowing how much the estate is actually worth.
It is important to know the value of an estate for inheritance tax purposes as well.
It is an incredibly important part of being an executor, and because of this it can feel rather overwhelming. There is no need to worry, however – as long as the valuation is carried out in a clear and concise way, following the logical structure of things, it will work out in the end.
Included within the valuation are money, assets, property, and general possessions. Money includes all the money in every account that the deceased has, as well any cash that is actually in their home or even wallet or purse. It includes stocks and shares, pensions, and life insurance policies too. Assets include businesses, and it can be useful to engage a solicitor to deal with this. Property includes all buildings and land. Possessions are things such as fittings and fixtures, clothing, vehicles, jewellery and more.
Gifts that the deceased gave away but kept an interest in – knows as ‘gifts with reservation of benefit’ – also need to be included within the estate’s value. This could be a house that they gifted to someone but remained living in, for example. There are some gifts that are excluded, however. These include gifts to spouses or civil partners, gifts that were made more than seven years before the death, wedding gifts, and maintenance payments.
It can be a minefield of confusion when it comes to carrying out this valuation – so why not contact the experts who can help you out?
The idea of a retirement village is a wonderful one. This is a place where, once you have bought your apartment or small house, you can move into a ‘village’ environment where there are care facilities and people on hand to help you in any way, but where you can also have your independence. These villages are extremely popular in America and Australia, and are becoming more the norm in the UK as well now.
They can make a real difference to the lives of those who choose to buy – or rent – their final home there.
But there can be issues for family members if the full details of the costs involved aren’t worked out in advance. This is because, although the cost of the retirement village seems fair, or even low, at the outset, there can be some major costs involved once the person who has bought or rented a home there has passed away or moved out for any reason.
And that cost will need to be met by the family.
The bill – typically known as an ‘exit fee’ – is usually capped at 10% of the purchase price of the property (which on average is £250,000, making the exit fee £25,000), although it can be much higher, and in some cases it can be as much as 30%.
It is important to understand exactly what these exit costs are, what they are for, and when they would need to be paid. Finding out the circumstances about all of these details is essential before signing up for any kind of long term commitment.
For some, however, this is the ideal solution. They may have a small income and therefore only want to commit to small outgoings, yet want to be able to enjoy the facilities of a retirement village. They can rely on their savings or property to be sold once they have died to pay for the outstanding amount.
It is a rare event for someone to be an executor more than once or twice in their lives, and because of this no lay person ever becomes an expert in executing a will. Why should they when it is such a one off event? This does mean, however, that probate can take longer than it might otherwise have done because the person executing the will has no idea where to start. It could also mean that mistakes are made.
One of the most common mistakes is for the executor to underestimate just how much time this role will take. It is never a quick job, and with more complicated estates it can be almost like a full time job. Pre-planning can help ease the burden slightly, but it should never be assumed that being an executor is something that can just be worked on around other commitments, or, if that is the way it will need to be done then the executor will need to keep everyone informed of their progress.
Another mistake that is often made is that the executor does not keep clear records of the work they have done as they do it. This can be a problem when someone asks about how the job is progressing. Keeping a diary is the best way to keep on top of things, and know when to contact whom about what. It is a good idea to open a new, separate bank account where all the money from the deceased’s estate can be paid out of when required.
Executors sometimes also pay beneficiaries too early. If this is done – perhaps due to pressure on the executor from the beneficiaries – then it can cause problems later on when other bills need to be paid and the money has already gone. Executors also need to ask for proof of ownership of property etc, rather than simply taking things on trust. Never let a family member remove something from the estate until you have proof that they are allowed to do so.
It is always best to seek expert advice if anything confusing or out of the ordinary is found in a will that is being executed.
Many of us are probably aware – even it only vaguely – about the case of Jarndyce and Jarndyce from Charles Dickens’ Bleak House. It is an inheritance and probate dispute that has gone on for decades, and runs throughout the narrative of the book.
But although that is fiction, there is a real life case that bears a striking similarity to that of the one from Dickens’ head. And it has only just been resolved after two hundred years.
It is the case of Voivode Haci Huseyin Aga. Two hundred years, 800 descendants, and a court battle that would have worn out most people by now, and it is finally concluded.
The inheritance revolves around a 33.6 acre pieces of land near Bodrum in Turkey. The current value of the land is thought to be around £23 million, and the two men who owned it – brothers and descendants of Haci Huseyin Aga – decided to sell. Only they couldn’t. Because 798 (or so) other descendants came forward to claim the land for themselves – or, if they couldn’t do that, they wanted a share of the proceeds from the brothers’ sale.
After a six year court battle, everyone lost.
In the end, the true owners of the land couldn’t be determined, which meant that the courts could sell the land, but because it would need to be done quickly, it is likely that the land would sell for much less than it is really worth.
Last year, the High Court were asked to oversee a complaint that a man named Ronald Butcher, a bachelor who had died at the age of 73, was not in his right mind when he wrote his will. The family of this man were sure of the fact, since Mr Butcher had left over £500,000 to a builder who had done some work for him in the past.
The family felt that that surely couldn’t be right. He only made the will two months before he died, and leaving all that money to a builder who used to clean out his gutters for free? No. That had to be wrong.
The High Court, however, did not determine that Mr Butcher was not of sound mind when he wrote his will, and let the builder keep the money.
The builder, named Danny Sharp from Kent, was left almost everything that the old man had. Which was more than many people had realised he could possibly be worth.
The two had a good friendship, which had lasted for six years and started with Mr Sharp offering to clear out Mr Butcher’s gutters free of charge. Since then, they often had a good chat, and ‘set the world to rights’ between them. They also discussed boxing as each enjoyed the sport (Mr Sharp’s son, Archie, boxes for England).
Despite this obvious friendship, Mr Butcher’s family felt the will was ‘ludicrous and absurd’ and were determined to find that it was not valid. Instead of the chats about boxing that Mr Sharp says he and Mr Butcher had, the family claim the old man disliked sport and wouldn’t watch it. They insist that the builder knew about the will – he claims it was a complete surprise – and that he might even have had something to do with coercing Mr Butcher to make it.
The judge, Lesley Anderson QC, however disagreed. She felt that Danny Sharp was a truthful witness and that he had shown kindness to Mr Butcher by calling on him and helping him out for free, without expecting or wanting anything in return. There was nothing suspicious about the will, and the accusations that the family made saying that the signature was a forgery were disproved – an expert in handwriting had given evidence to say that it was a true signature.
Mr Butcher’s body was not discovered for some weeks after his death in 2013.
It sounds crazy, doesn’t it? It sounds like a story from a soap opera or melodrama. But actually, could a child conceived using your frozen sperm actually go on to inherit your estate? Well yes – they could. This is the 21st century version of an illegitimate child turning up to inherit a Victorian estate. Only in the modern day version, the child would probably have been conceived after your death. It all sounds rather confusing, complicated and not a little macabre, but it is entirely possible.
After all, isn’t that what frozen sperm is all about? Isn’t it saving a little of yourself (literally, in this case) for after you’ve gone, so that you can – in some small way – continue to live?
But since that is the case, it could be in some people’s interests to ensure that they consider this issue when they make their wills. It may sound strange to consider children who don’t currently exist, and possibly never will, but it is the best way to cover every eventuality. Because anything can happen when you die but leave behind not only an estate but genetic material too. And this could add an heir, even after you have gone.
Already a New York court has ruled that a posthumously conceived child is a descendent nonetheless, and can therefore receive an income from a family trust. It is slightly different in Florida and California, however. In those USA states the child must be born within 36 months of the father’s death in order to have any claim to any inheritance right.
But the best advice for those who have left sperm – or eggs – in frozen form for future use is to make a will that states specifically how and when those pieces of genetic material should be disposed of and, if any children are conceived using them, if they should have any of the inheritance at all.
Ex-husband's inheritance appeal goes ahead
The Court of Appeal heard a case recently, whereby the ex-husband of a woman was granted an appeal to contest the validity of his late mother in law's will, in a bid to claim his alleged inheritance.
Prior to their divorce ten years ago, the couple had allegedly formed an agreement whereby on the mother in law's death, £100,000 from her estate would go to her daughter and the remainder of the balance of the estate would then be divided between the same daughter and her then-husband.
Although no dates are given, at some point in time after this event, the couple divorced and the wife's mother passed away. Her daughter was indeed left £100,000 but instead of the balance of £150,000 being divided between the daughter and the now ex-husband as previously agreed however, the entire balance was left to the woman's children.
The ex-husband subsequently argued that he was entitled to half of the balance which amounted to £75,000 and brought about a probate claim to challenge the validity of the will. This initial claim was turned down however, as the court found that he did not have enough "interest" in the will as a creditor of the beneficiary. The only people entitled to challenge a will it noted, are actual executors, beneficiaries and creditors of the deceased.
The Court of Appeal felt differently, however. Lord Dyson ruled that the man was connected enough to the estate to maintain sufficient "interest" and recognised that the only way he could fight for his money was to challenge the validity of the will.
The case will now go to appeal.