Probate Cost Scenarios
Scenario 1 – Fee £2,400+VAT = £2,880 gross
Background
In this scenario, we were instructed by two executors whose mother had recently died.
There was a will, which was not being contested.
There was a full consultation between the executors and one of the probate team to advise of the probate process.
On speaking with the client, we established the estate comprised of a property, a few bank accounts, a loan owed to the deceased and premium bonds. The executors had arranged for valuations of all of the assets. The total value of the estate was just under £1m.
The client was happy to value the assets and did not need for us to be involved with distributing the estate.
What we agreed to do and be responsible for
We reviewed the will and advised that by utilising the relevant spousal exemptions there would be no Inheritance Tax to pay. We also prepared the relevant Inheritance Tax returns based on the information provided by the client.
There were no queries raised by HMRC and, therefore, the application for probate was submitted and issued, allowing the client to realise the assets and distribute the estate.
Scenario 2 – Fee £5,400+VAT = £6,480 gross
Background
Mrs W died leaving two adult children.
Mrs W had left a valid will with her estate to be split evenly between her two adult children who were also named as the executors.
A member of the probate team met with Mr W (son) to discuss his late mother’s estate, both of whom had been longstanding clients of the firm. They discussed the steps required in order to obtain the grant, and which of those steps he felt able to do and which he would like us to do on their behalf.
It was established that Mrs W’s assets were some bank accounts with Lloyds, an ISA with Lloyds and three rental properties. It then transpired that two property gifts had been made in the seven years prior to death which also needed to be included within the estate, as well as some liabilities to settle. We also concluded the personal tax position for Mrs W to death to ensure the tax liability was included within the estate value.
The client did not want to be too involved in the process, and it was agreed that we would undertake most of the administrative duties, including dealing with the Inheritance Tax returns, making the application for probate, paying the creditors and distributing funds to the beneficiaries.
What we agreed to do and be responsible for
Valuations were required in respect of the three rental properties, as well as historic valuations for the properties at the date of gifting. We clarified closing balances and accrued income on bank held balances and final estate liabilities and cost allowance, making due allowance for the time that had passed on the gifts made in the year’s prior to death in order to correctly value the estate for tax purposes.
We completed the Inheritance Tax forms within the prescribed time scale and due to the beneficiaries wanting to retain the properties short term, we agreed settlement for the Inheritance Tax due on the liquid estate assets and a 10-year payment plan arrangement attached to the property. We arranged direct payment of the Inheritance Tax from the bank accounts held by Mrs W with Lloyds via form IHT423.
Once the tax position was finalised with no queries from HMRC, we applied for and received the grant of probate.
Subsequently, once probate was obtained and one of the properties was sold, we arranged final settlement of the previously agreed 10-year payment arrangement.
We effected the transfer of the three properties into the beneficiaries’ names at the Land Registry, settled outstanding liabilities with estate creditors and arranged distribution of the estate to the beneficiaries, after making due allowance for funeral costs already paid by one beneficiary solely.
Scenario 3 – Fee £10,000+VAT = £12,000 gross
Background
Mrs R died, appointing three children as executors.
The estate was worth just under £2m at death, but significant lifetime gifting had been undertaken.
One of the probate team met with the executors and ascertained the estate assets, liabilities and gifting actions, as well as reviewing the will requirements for distribution and the position from the first death to ascertain scope for any transfer of bands, including consideration of the interaction of the residence band tapering for estate values above £2m and how this interacts with gifting.
The estate comprised property, multiple bank accounts, investment funds and lifetime gifting.
There were ad hoc assets for a personal car and some small aspects to deal with on pension payments and DVLA refunds as well as a few small estate liabilities to pay for care and property costs prior to death.
The client did not want to be too involved in the process, and it was agreed that we would undertake most of the administrative duties, including dealing with the Inheritance Tax returns, making the application for probate, paying the creditors and distributing funds to the beneficiaries.
The distribution was complicated by the will requirement to account for tax due on lifetime gifting and a levelling up requirement for the lifetime gifting undertaken years prior.
What we agreed to do and be responsible for
A valuation was required in respect of the property and other bank funds and investment funds.
We completed the Inheritance Tax forms within the prescribed time scale and made our own calculations of tapering to establish an expected IHT liability. This agreed with the HMRC calculations then issued and we arrange direct settlement from the investment funds.
Once the tax position was finalised with no queries from HMRC, we applied for and received the grant of probate.
We realised the remaining cash assets and eventually the sale of the property to enable us to undertake calculations to ensure we were able to distribute the estate in accordance with the will, to account for lifetime gifting already done as well as a legacy payment.
Finally, we made submission to HMRC of the estate tax income tax return and arranged settlement of the liability from the estate funds realised from closing down all bank and investment accounts.
Note – While the circumstances of this case are similar to an actual case we have dealt with, some circumstances may have been changed for the purpose of these examples.
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