You don’t need to poll too many to conclude that the banks are probably the most hated of all UK organisations - thanks to a history of poor service and excessive charges.
And even when you’ve left this mortal coil, they don’t let go. In fact, some of their best tricks are kept for when you’re dead (and can do nothing about it!).
Take probate – that’s the legal process for sorting out a will and ensuring that all those named in it get their fair share. It’s a must if the estate is worth more than a nominal £5,000.
Banks and solicitors are usually keen to muscle in and handle probate, as it’s a very lucrative business. It’s not uncommon for some banks to charge 4% plus VAT, even on on simple to administer estates – potentially resulting in a five figure bill.
I recently came across the example of bank charging almost £50,000 in probate fees where a Swansea man had died leaving £1m in a savings account with that bank. It was a straightforward case of paying the inheritance tax and dividing what was left equally between six grandchildren. Had the deceased chosen a cheaper executor the fees may have been less than £5,000. Cheaper still, he could have chosen a trusted friend(s) or relative(s) capable of handling probate – effectively free.
If you ask a third party such as a bank or solicitor to write your will, give explicit instructions as to who will be the executor of your estate. Fail to do this and they’ll likely include themselves – opening the door for pocketing fat probate fees when you die. Few relatives are in the mood for haggling over a probate bill when a loved one has just passed away, making them easy prey for unscrupulous probate professionals - especially as it can be difficult to change executors after death.
So who should you name as the executor of your estate? The cheapest option would be a close relative or friend you can trust to complete the necessary tasks and paperwork – around 30% do this. On a straightforward estate this is likely to take around 20-30 hours of their time over a period of several months. If professional help is needed they can then shop around for a fair deal – at least your estate won’t be locked into using a potentially expensive probate firm from the outset.
The Probate Service is usually helpful and most people comfortable with forms and figures should be capable of handling the process. You can find information on the Probate Service website.
If you decide you’d rather appoint a probate professional as the executor of your will, then shop around to ensure a competitive fee. As you’ll find out, fees can vary enormously. Spotting a gap in the market, a firm called Final Duties recently launched a probate ‘broking’ service where, for a fee of £295, they’ll search the market for a competitive quote.
Final duties also offer the ability to ‘pre-pay’ your probate fees. What happens is that you set up the deal while you are still alive, pay for it – the cash goes into a special trust fund – and then you are assured that your last testament will be processed by a specialist solicitor.
At the same time, the pre-payment guarantees the price (unless the estate becomes substantially more complex) so there will be no inflationary or other increases – although you will obviously lose out on the interest or investment returns you could have otherwise earned on the money you hand over.
Unlike funeral costs, probate fees can’t be set off against what you leave to reduce any inheritance tax your estate might owe. Pre-paying probate fees overcomes this - the money leaves your estate while you’re still alive.
If you have already written a will then check who it names as the executor and amend, if necessary. Also don’t be afraid to ask appropriate family or friends whether they would consider being your executor. Fail to do either and you could end up hitting your loved ones with a significantly bigger bill than you need to.
TIP 1 - Make sure you have a valid will and that is rewritten as circumstances change.
TIP 2 - Married couples and those in civil partnerships may find it best to leave everything to each other to reduce inheritance tax.
TIP 3 - Make sure executors are not “professionals” such as banks, lawyers, will-writers or accountants. If you leave them in, you could be handing them an open cheque on your estate. Rewrite existing wills to exclude them –this can be done at any time before death.
You can read more about wills on our inheritance tax page.