Article by Phil
The number of families needing probate help is on the rise with delays in grants of probate spiralling.
According to the Ministry of Justice own figures the number of cases waiting over 6 months for grant of probate has increased from just under 4,000 back in 2020 to over 10,000. The numbers waiting over two years whilst still relatively small have increased by over 130%.
Things are only going to get worse as pensions come into the scope of Inheritance Tax (IHT).
Personal representatives will also now have to shoulder the responsibility for tax calculations themselves. This is only likely to create more problems and delays. Plus, as we’ve pointed out before, fines for delays in filing tax returns will start after only six months.
New pension rules
HMRC have only just provided more details of what will be required when the new rules to come into force next year. These include a requirement for personal representatives to inspect personal records to establish how many pensions there are. Including contacting workplaces to establish any pensions. Then they will need to contact the pension providers to get valuations. All before calculating the IHT due.
Although HMRC say that they are developing a tool to help the calculation process.
Recording your gifts
Keeping a record of any gifts, you may have given to family and friends over the last seven years is vital to help protect your future personal representatives. They will be required to complete a declaration of gifts as part of the IHT calculation process. Having no records makes this very difficult.
Research by Canada Life found that over half of people who had made a gift had made no formal record of the gift. Only 13% had a formal electronic record. 15% had written it down somewhere. Only 30% said that they could remember the exact amount they had gifted.
But the average amount gifted (by those who could remember) was over £40,000 way beyond the £3,000 a year tax free allowance. HMRC are keen to make sure that all IHT due is collected, so poor record keeping is likely to make the probate delays worse.
Over half of people said they didn’t know that the following counted as financial gifts:
- Jewellery
- Antiques and furniture
- Stocks and shares
- Land and buildings.
They all do and IHT needs to be paid on the value of these assets.
But, with the changes to IHT on pensions, we are seeing much more gifting to grandchildren, skipping a generation. Often the gifts are made in trust to allow for control over what the money is used for. We provide a lot of advice on the use of trusts so if this is something you think you might benefit from, give us a call for a free initial meeting.
Start planning early to avoid the need for probate help later
That’s the clear message from Octopus Investments. They looked at data from the Centre for Economics and Business Research which found that families who started their estate planning at 50 would save on average £250,000 in Inheritance Tax compared to those who started making plans for inheritance at 70. The savings come from using available tax allowances as early as possible. The figure is estimated to rise to nearly £400,000 once pensions come into the scope of IHT next year.
Who provides probate help?
Using a probate help professional is becoming even more important for families with over 60% of people admitting to being confused by the rules around IHT. But what are the options?
Solicitors are usually the first port of call for many people. But they can be expensive. Usually charging an hourly rate which can be in excess of £200 an hour in many cases. That soon mounts up if the case is complicated. They may offer to charge a percentage of the estate as a fee, but you will also be charged VAT on any of the fees including the hourly rate. So that’s an extra 20%.
The alternative is to use a financial adviser. Some, like us offer a separate probate help service. We have years of experience in dealing with probate matters for the families of our financial advice clients. We are also experts in calculating IHT, especially on investments and pensions.
Often, we can also provide a financial advice service to your loved ones if they are inheriting large amounts and want to know how to look after their money.
Make sure your Will is valid.
Just a reminder to make sure that Your Will is both up to date and importantly valid. Remember that digital Wills which have become increasingly popular are not legally valid. During Covid the law was amended to allow for digital signatures and storage, but this exemption has now lapsed.
Your Will can be prepared digitally, but it needs to be printed off and signed and witnesses in ink with that paper copy being the only one which is legally valid.
We’ve experienced all sorts of problems where clients haven’t been able to get hold of their original signed witnessed Will. It can cause serious delays so please be aware.
Disputes are on the rise
40% of financial advisors report having seen a noticeable rise in disputes over inheritance. The main reason seems to be the rise in “blended” families as a result of divorce and re-marriage, with step children or second spouses disputing unequal shares in assets. Most of this is down to poor communication with family members not being clear with each other about who is getting what. According to research only 16% of people had discussed inheritance with their family.
With trillions about to be passed down a generation these types of disputes are only going to become more commonplace. Please make sure your Will is up to date and clear. If possible have a conversation with your family to set expectations. It will save heartache and legal costs after you pass.
Get more information.
For more information about probate, why not contact Christina today. We offer a free initial meeting to discuss your requirements and explain how our service works. You are under no obligation to use us after that if you don’t want to and we won’t pester you.
So why not call us today on 01282 614444 or e mail us enquiries@ccfps.co.uk or use our contact form online.
Or if you’d prefer to think about it some more, why not have a look at our Facebook page, our Vouched For page, or our Testimonials page to see what our customers think about us.
