Probate fee/ Deed of variation

[Bouleversee]

Following my previous thread "Is this will valid?", having got through the cremation, memorial service and wake, Christmas and (almost) a horrible virus infection which has left me feeling as though my head is stuffed with cotton wool, I am trying to come to grips with probate etc.

Some queries arise immediately:

1) What happened about the proposed changes in the probate fee? I know there was a consultation process early last year and I contributed my tuppence worth but had forgotten all about it till today and I have been unable to find out the outcome. Did the changes go through or is it all still under consideration? I seem to remember it would mean a huge increase in the fee in our case if it went through, even though the maximum that would pass to the next generation would be the IHT exempt amount. Would the fee be any different, or the same, if the home was owned as tenants in common as opposed to joint tenants? (As previously stated, we never got around to changing the title of the property from the former to the latter after the IHT exempt amount was able to be carried over to the 2nd death).

2) If we want to change the will by deed of variation, does this have to be done before or after applying for probate/grant of representation?

3) I have just printed out the 13 pages of guidance notes re the residence nil rate band (RNRB) which will no doubt give rise to further queries but I need a few hours sleep before I can absorb that one.

Our estates have both increased quite a lot in recent years as we have been unable to spend money on holidays, social life, clothes, house maintenance (now urgently needed) etc because of my husband's illness. Similarly, we haven't got around to giving money away, other than the IHT annual exempt amounts, as we thought it might be needed for nursing home fees. It seems wrong that high probate fees should be payable on the first death if no IHT is payable at that point. I will have to allow for nursing home fees as there will be nobody at home to care for me when the time comes, any time now if I continue to feel like this

[chas49]

The consultation on revised fees closed on 1 April 2016 but the Government has (so far) neither published its response nor announced a proposed date for any changes. https://www.gov.uk/government/consultat ... of-probate

I can't find anything which indicates whether it's the date of death or the date of application that is relevant for determining the fee. Can anyone else throw any light on this?

[PinkDalek]

The consultation on revised fees closed on 1 April 2016 but the Government has (so far) neither published its response nor announced a proposed date for any changes. https://www.gov.uk/government/consultat ... of-probate

I can't find anything which indicates whether it's the date of death or the date of application that is relevant for determining the fee. Can anyone else throw any light on this?

I looked last night and, like you, found nothing helpful, having glanced at the related documents here https://consult.justice.gov.uk/digital- ... f-probate/.

I'm guessing it would be the date of application that would be relevant but have failed to find confirmation, although this suggests my guess may be accurate https://www.thegazette.co.uk/wills-and- ... ontent/173 based on the prior increase.

[Bouleversee]

Well, I finally managed to get through to the probate office today and they told me that in fact no changes in the probate fee had so far been made; they had heard nothing more since the consultation ended. So for the time being it's still £215 - phew! But perhaps I should get my skates on in case they make a move.

I also managed to get through to the Land Registry after a very long wait and was surprised to find that in fact we are down as joint proprietors so all I have to do is fill in form DJP and send it in with the death certificate. No fee payable. And I don't need to wait for probate to do this.

The probate office told me that if I wanted to do a deed of variation, I didn't need to wait for probate for that either which I found rather surprising.

Now trying to get my head round the transferability of ISA allowance(with or without the actual ISA contents) and whether it would be better not to leave the exempt amount so as to get a higher amount on the 2nd death and give some of my own money to the children instead and hope to live a few years as one of you suggested in the original thread. Osborne and co really have made life much simpler, haven't they? How much time and energy must have gone into all these complex rules.

I still find the gov. uk website difficult to get around, with so many diversions to click on etc., Oh for the days when we could simply order a booklet which set everything out in a comprehensible way!

Too tired to do more today.

[mutantpoodle]

as I understand it you have to make any deed of variation within two years
thus obviously not tied in with probate at all
(a deed of variation wouldnt affect IHT/probate anyway....would it?)

[Dod1010]

I have recently been involved with a Deed of Variation for my late wife (under Scots Law so probably not much help for you). I would have thought though that like my case, you would be better to get the Deed of Variation done before probate because then probate will be granted for the new terms not the old. I assume that matters but I do not know. Anyhow I assume you will have to consult a solicitor re a Deed of Variation and he will be able to keep you right.

Dod

[swill453]

Anyhow I assume you will have to consult a solicitor re a Deed of Variation and he will be able to keep you right.

It's certainly possible to do a Deed of Variation without a solicitor, and without even informing the executor of the will if it doesn't affect anything of relevance to them (like Inheritance Tax).

https://www.gov.uk/alter-a-will-after-a-death has useful information.

Scott.

[Gengulphus]

as I understand it you have to make any deed of variation within two years
thus obviously not tied in with probate at all
(a deed of variation wouldnt affect IHT/probate anyway....would it?)

The whole purpose of a Deed of Variation is usually to affect IHT! Specifically, it causes IHT and CGT to be calculated as though the will had left the assets it names to their new recipient rather than the recipient the will actually named - and while it's probably possible to come up with circumstances in which a Deed of Variation doesn't affect IHT but is worth it for the CGT effects, it's usually IHT-saving effects that it's done for - things like:

* Redirecting a bequest to charity to make it IHT-exempt, and possibly also to cause the estate to qualify for the reduced 36% rate of IHT for leaving more than 10% of it to charity.

* Redirecting a bequest from the deceased's children to their grandchildren to reduce the number of IHT 'bites' the Chancellor gets at it over the years.

* If one wants to give part of a bequest to someone else, redirecting it to them - that way, it's not a gift for IHT purposes, and so one doesn't have to survive 7 years before it falls out of one's own estate.

The way it works most smoothly is Deed of Variation first, then determine and pay IHT based on the Deed of Variation, then get probate based on having paid the IHT. But one can do the Deed of Variation later, including after probate, as long as it's within 2 years: in that case, you need to first determine and pay IHT, not taking the Deed of Variation into account, and get probate based on that, then do the Deed of Variation and submit a corrective IHT account to reclaim the IHT it saves.

Gengulphus

[swill453]

while it's probably possible to come up with circumstances in which a Deed of Variation doesn't affect IHT but is worth it for the CGT effects, it's usually IHT-saving effects that it's done for - things like:

* Redirecting a bequest to charity to make it IHT-exempt, and possibly also to cause the estate to qualify for the reduced 36% rate of IHT for leaving more than 10% of it to charity.

* Redirecting a bequest from the deceased's children to their grandchildren to reduce the number of IHT 'bites' the Chancellor gets at it over the years.

* If one wants to give part of a bequest to someone else, redirecting it to them - that way, it's not a gift for IHT purposes, and so one doesn't have to survive 7 years before it falls out of one's own estate.

While agreeing that IHT is usually the underlying reason for a DoV, most of the examples you give won't necessarily affect IHT for the will under probate.

i.e. they reduce the estate of the donee for their subsequent IHT.

Scott.

[Gengulphus]

It's certainly possible to do a Deed of Variation without a solicitor, and without even informing the executor of the will if it doesn't affect anything of relevance to them (like Inheritance Tax).

https://www.gov.uk/alter-a-will-after-a-death has useful information.

Agreed that it's possible, and I'll point out the document https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/373615/IOV2.pdf that can be obtained with the correct few clicks from your link. It's a checklist of points that one needs to get right - and some of them aren't entirely obvious: in particular that in order to have its IHT and CGT effects, it must actually state that it is effective for particular sections of the relevant taxation Acts, and that for a Deed of Variation in favour of a charity to be effective, the charity must have been informed before the Deed is signed.

If the amount of IHT saved is large or the variation is at all complicated, I would personally always use a solicitor. That's partly to be certain all the details are right and recorded correctly (e.g. getting a charity to acknowledge having been informed before signing, so that one can easily prove that they were informed if it becomes necessary), partly because you get the benefit of the solicitor's professional indemnity insurance against the solicitor making a mistake (whereas if you make a mistake yourself, tough!), and partly because what you are doing in a Deed of Variation is effectively writing some substitute will clauses. They need the same sort of care taking about them as actual will clauses...

Gengulphus

[Gengulphus]

While agreeing that IHT is usually the underlying reason for a DoV, most of the examples you give won't necessarily affect IHT for the will under probate.

i.e. they reduce the estate of the donee for their subsequent IHT.

Good point - I somewhat lost sight of the ball I was playing there after the first example (redirecting assets to a charity). At least I got that one relevant example!

There are others - e.g. the will leaves more than the IHT allowance to children on the first death, and they would prefer to redirect the excess to the surviving spouse in order to avoid an immediate IHT bill. (This will tend to increase the IHT bill on the second death, which would reduce the value of the saving considerably - but there are circumstances in which it won't.)

Gengulphus

[Dod1010]

In the excerpt from the Gov item, who is the 'you' they refer to? I think a Deed of Variation is such a minefield that although getting correct legal advice may not be essential. it certainly makes sense. It need not simply be dealing with IHT matters (CGT on the whole is not an issue since it disappears at death in most cases) but could also introduce new beneficiaries and may thus disadvantage any residuary beneficiary whose agreement will be required to avoid legal issues down the line.

Bear in mind also that at all times we need to respect the wishes of the deceased, whose Will it is that we are mucking around with.

If the surviving spouse is the sole beneficiary then it is not much of an issue but we are discussing the general position here not a particular case.

In the same way that Wills are best drawn up with the benefit of legal advice, so I think is the case with Deeds of Variation and depending on the OP's particular situation, she would be well advised to do so.

Dod

[Bouleversee]

In our case, the variation would be either to skip a generation as regards the IHT exempt allowance and/or to reduce the sum left or not use any of the allowance at all, in order to carry forward the allowance to the second death (mine) and hopefully get the extra allowance relating to the home (which IIRC is being phased in) on the 2nd death. So that doesn't mean more tax would be paid on the 2nd death, does it, especially since I could give money away and possibly survive for 7 years or even if less the taxable sum would gradually reduce? All a gamble, of course, and possibly not worth the candle.

If there will be no IHT due and the property was owned jointly and has been transferred to the survivor, does one still need to pay an estate agent for a formal valuation for probate? I believe half the value must be included in the total asset value when applying for probate.

[chas49]

If there will be no IHT due and the property was owned jointly and has been transferred to the survivor, does one still need to pay an estate agent for a formal valuation for probate? I believe half the value must be included in the total asset value when applying for probate.

If the property was held as joint tenants, ownership passes by reason of survivorship and not by operation of the will. As I understand it any such asset is ignored for the purposes of probate and IHT.

[swill453]

If the property was held as joint tenants, ownership passes by reason of survivorship and not by operation of the will. As I understand it any such asset is ignored for the purposes of probate and IHT.

Ignored for probate (well the bequests in the will anyway) - yes.

Ignored for IHT - definitely not!

Scott.

[Lootman]

If the property was held as joint tenants, ownership passes by reason of survivorship and not by operation of the will. As I understand it any such asset is ignored for the purposes of probate and IHT.

Ignored for probate (well the bequests in the will anyway) - yes.

Ignored for IHT - definitely not!

Indeed. But in cases like this the process that is followed is different. If the assets of an estate are held as joint tenants, typically the case for a married couple but could be the case for any two people, then there's a good chance that no probate will be needed. And it is typically the probate process that values the estate, determines any IHT due and ensures that it is paid in a timely manner.

Absent probate, somebody has to quite independently go through the process of IHT determination. The executor of the will (assuming one exists) will probably decline to act in such a situation, considering that there is nothing to do, and to avoid the risk of being held personally liable for tax or any other liability.

So in theory, yes, IHT is still due. In practice I suspect it sometimes doesn't get computed or paid, either because nobody knows to pay attention to it, or because there is a lack of motivation, or even deliberate outright fraud. Which then opens up the question of HMRC initiating an investigation quite independently. Without the usual "trigger" of probate, I'd be willing to bet that a good number of cases slip through the net.

The same applies, by the way, if the deceased largely gives away his assets whilst alive. IHT may still be due but there is no probate process to catch it and alert the interested parties to the potential liability, nor to alert HMRC that a liability exists.

[PinkDalek]

If there will be no IHT due and the property was owned jointly and has been transferred to the survivor, does one still need to pay an estate agent for a formal valuation for probate? I believe half the value must be included in the total asset value when applying for probate.

Ignoring the IHT aspect for the moment, as we don't yet know if you'll use the Deed of Variation route, some Estate Agents will provide written valuations for free, especially if they feel you may sell up in the future.

Best to obtain at least two valuations and ensure that proper written instructions are given, such that it is clear the valuation requested is for the open market value at the date of death for the purposes of the Inheritance Taxes Act. The request should not be for a "Probate valuation" as HMRC are said not to like such wording.

The level of discount available for joint owners is considered in the Valuation Office Agency manual , dependent on the circumstances, appears to be 15% (or 10% as explained in the manual):

http://manuals.voa.gov.uk/corporate/pub ... n-s18.html

Extract only:

18.4 Half share, joint owner occupiers

Where at the valuation date any co-owner remains in occupation of the property, as their main residence, (other than the co-owner whose share is being valued) the normal approach is to take half the freehold vacant possession value and deduct 15%. ...

[PinkDalek]

...

Before the thread goes too far on whether or not Probate is required, I've seen from elsewhere on the Lemon Fool that he had, presumably not jointly, at least £50,000 in a cash ISA, some NS&I index linked certificates and "a large amount in equity ISAs". Based on those descriptions, I'm fairly certain the institutions concerned will require the Executor(s) to obtain Probate before they'll release the funds.

Have you checked the situation with them?

[PinkDalek]

Specifically, for NS&I, see the two links contained within https://www.nsandi.com/what-do-i-do-when-someone-dies

The wording is slightly different in each but the first states Probate may be needed if the total customer savings are £5,000 or more but the second states Probate will be needed in such a case. I haven't read the entirety.

[Gengulphus]

In the excerpt from the Gov item, who is the 'you' they refer to? ...

Not certain whether you want answers to that question - I can't tell whether you intend it rhetorically or really want to know. But if you do want answers, don't try to make us search the thread for what you're talking about - quote the excerpt!

I think a Deed of Variation is such a minefield that although getting correct legal advice may not be essential. it certainly makes sense. It need not simply be dealing with IHT matters (CGT on the whole is not an issue since it disappears at death in most cases) ...

The issue with CGT isn't about the CGT situation before death, which as you say disappears on death, but after death: the DoV causes the new beneficiary to have probate value as their base cost rather than the original beneficiary. E.g. a shareholding rises considerably in value after death and before it can be distributed, the will said that it was to go to directly to the original beneficiary (not be sold and the proceeds distributed) and the original beneficiary is a higher-rate taxpayer who has other uses for their CGT allowance, while the new beneficiary is a basic-rate taxpayer who doesn't.

... but could also introduce new beneficiaries and may thus disadvantage any residuary beneficiary whose agreement will be required to avoid legal issues down the line.

Yes, I've done one where I was a residuary beneficiary and wanted the redirection to come out of my share of the residue, not affecting any other residuary beneficiary. The wording the solicitor came up with did that and was entirely clear and comprehensible to me - but I couldn't have come up with it myself!

I would only take the DIY route if it was a very simple case.

Bear in mind also that at all times we need to respect the wishes of the deceased, whose Will it is that we are mucking around with.

No, actually we're not. A DoV can only redirect assets in ways that could be done by the original beneficiaries inheriting and then making gifts from their bequests - all it actually varies is the tax consequences.

Agreed about respecting the wishes of the deceased, though that's a moral issue rather than a legal one. E.g. if the deceased had expressed a wish that X should never benefit from their money, I would definitely not want to make a gift from my inheritance to X (and so equally not to make a DoV in X's favour) - but I would be under no legal duty not to, and indeed I might be under a legal duty to pay X from my inheritance (e.g. if I were an undischarged bankrupt and X was one of my creditors).

Gengulphus