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Probate delays inflate inheritance tax bills passed onto bereaved families

probate

Covid backlogs and the loss of experienced staff are prolonging waits for probate


By Charlotte Gifford12 March 2023 • 10:00am


Bereaved families are being forced to pay hundreds of pounds a week in extra inheritance taxes because of severe delays at the courts.


One in five applications for probate, the legal document required to administer a late loved one’s estate, are now taking six months or more to be processed, according to Family Courts data.


Death duties must be paid within six months of death. But, crucially, families must first obtain a grant of probate to legally access the money of a dead relative in order to pay the divisive 40pc levy.


Anyone who misses the deadline must pay a penalty, with interest applied to unpaid debts.


It means families dealing with the loss of loved ones face paying thousands in extra

taxes through no fault of their own.


Probate registries have been struggling with delays since 2019, when an old analogue system was moved online. However, waits have lengthened, following higher death tolls during the pandemic and the loss of a number of highly trained staff.


But the pain of the interest rate charges is now far more severe, with HM Revenue & Customs' penalty soaring to a 14-year-high of 6.5pc due to consecutive rises in the Bank Rate – adding £355 a week to a £250,000 IHT bill, according to the tax office’s own interest calculator.


Will Richards, of law firm Hine Downing Solicitors, said he had a client with a £108,000 death tax bill who had now been paying interest for six months because of probate registry delays out of his control.


Natalie Payne of the solicitors Morr & Co said one of her clients was paying interest because probate delays have prevented them from selling their property, meaning they are unable to raise the funds needed to pay their tax bill.


"We applied for probate in October 2022. As of February 2023, it was still in the queue to be examined,” she said.


Mr Richards blamed the delays on a lack of highly trained staff, many of which he said were lost when the probate system moved online.


“The government decided to digitise and centralise probate registries to save on costs, but all they’ve done is shift the burden to the consumer,” he said.


Interest on IHT is sometimes not a problem for families. This is because, if most of the estate is held in bank accounts, in some cases you can pay IHT using the deceased’s funds without a grant.


Joe Cobb of the law firm JMW Solicitors said: “Most banks or financial institutions will release cash or sell investments to generate cash in order to pay HMRC the IHT liability before the grant is issued.”


However, where most of the deceased’s estate is tied up in illiquid assets such as property, a grant will be required.


“Delays in issuing the grant lead to delays in selling the estate assets, which in turn means that the IHT is paid later and incurs more interest,” Mr Cobb said.


Average inheritance tax bills

Year

Historic average tax bill

2012/13 £170,391.06

2013/14 £174,611.40

2014/15 £181,465.52

2015/16 £178,775.51

2016/17 £179,715.30

2017/18 £197,520.66

2018/19 £209,502.26

2019/20 £215,652.17


Tim Stovold of accountancy firm Moore Kingston Smith said this could leave executors, often family friends appointed to see out the last wishes of the deceased, in a legal dispute and even out of pocket.


“In a worst-case scenario, the beneficiaries may blame the executors for causing an unnecessary expense and seek to recover this from them,” he said.


“Years ago, six months to pay IHT was absolutely fine because you’d get a grant in two weeks. You could ring up the staff and speak to them on the phone if there were any issues. Now, no chance. Nobody’s picking up.”


Simon Hancox of the estate administration service the Kings Court Trust said over a third of their outstanding grants had been at the probate registry for six months or more.


“This is made all the more disappointing by the fact that we are seeing other grants come back in less than four weeks when we are continually told that cases are worked on in date order,” he said.


The huge gap between how long some families are having to wait compared to others is the result of a cost-cutting drive to shift the probate process online, solicitors said.

Ian Bond of law firm Irwin Mitchell said the Ministry of Justice, which oversees the probate courts, had been progressively modernising its system.


He added while that meant simple wills often went through the system without a hitch, more complex cases were taking far longer to complete.


The 20pc of cases delayed for 24 to 26 weeks were all cases where there was either no will or no executor, meaning a family member, friend or the court has to obtain “letters of administration” to deal with the estate, according to the most recent official data.

A spokesman for the MoJ said this was the cause of much of the delay. “Letters of administration are our more complex applications which need examining by our more experienced examiners based in the probate registries,” he said.


The MoJ added it was hiring more staff and said it expected waiting times to improve as a result.


“We have upskilled more staff to examine the more complex paper applications to release the experienced examiners to address the more complex applications such as these, so we will see a reduction in volume and timeliness in the coming months, plus earlier identification when the applications are made for referral and handling,” the spokesman added.


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