IN TRUST SUMMER 2017: PRACTICAL TIPS TO HELP YOUR EXECUTORS
12 / 07 / 2017
The controversial plan to introduce a banded system for probate fees, with a maximum fee of £20,000 for estates over £2 million, was dropped due to lack of Parliamentary time before the General Election. However, it is anticipated that the measure will be reintroduced by the new Government, although the timing is unclear. Assets held in your sole name will generally be frozen on death until probate is granted and executors could face practical issues in finding the necessary funds to pay for these fees. In addition to probate fees, inheritance tax (“IHT”) will need to be met before assets in the estate can be released.
For complex estates, it can take time for probate to be granted. Whilst most creditors are prepared to wait until after probate, some, such as carers, cleaners or gardeners, may require payment more quickly. So what arrangements can you make now to assist your executors in meeting immediate liabilities after your death?
Review your assets. A life insurance policy written in trust for the benefittof your family could be considered. This will provide funds to pay fees, liabilities and any IHT on your estate. If set up correctly, there will be no IHT on the sums paid out under the life policy. Pension benefits could also, subject to the scheme’s rules, be accessible to cover probate fees.
If the new probate fee regime is introduced, you could consider holding property as “beneficialljoint tenants”. Such property assets will not require probate and will reduce the value of your estate for probate purposes, and any corresponding probate fee.You could also consider opening a joint bank account with your spouse, partner or another trusted party, containing sufficient funds to cover the probate fee and other immediate outgoings. The account will automatically become the survivor’s on death, meaning cash will be accessible on production of the death certificate.
The use of trusts to hold assets can also provide a flexibleesolution when planning for the myriad of liabilities that your executors will need to settle as part of the administration of your estate.
These options, and others, need to be carefully considered before going ahead and should always correspond with any provisions in your Will, including any provisions you have made in respect of your home to make use of the the new IHT “residence nil-rate band”, to make sure your wishes on what will happen to your estate on death are honored. The residence nil-rate band is looked at in further detail in this edition of In Trust. When transferring assets into joint names and/or others to look after on your behalf, the risk of leaving your assets open to financial abuse should not be underestimated. However improbable this may seem, you should take steps to protect your assets in your lifetime and on death and good independent financial advice should always be taken when looking into life insurance policies, pensions or any other financial products