What are the advantages of a probate bare trust?

Probate is the process by which a person takes legal control of another person’s assets after their death. The current system, in place since 2014, means that no fee is charged for estates worth less than £5,000, with any estate worth more than that figure subject to a flat fee of £155 if probate is sought by a solicitor, rising to £215 if it is sought by an individual.

However, following the conclusion of a review of Her Majesty’s Courts & Tribunals Service (HMCTS) last year, a consultation on reforming fees for grant of probate applications in England and Wales was published in February 2016. If the current proposals come into effect, these fees would change significantly. Under the new structure, any estate worth up to £50,000 would incur no fee. Those worth between £50,000 and £300,000 would be charged a £300 fee, with the amount increasing for higher value estates. Estates worth between £500,000 and £1million would incur a fee of £4,000, for example, with estates of over £2 million – the highest value bracket – facing a considerable fee of £20,000.

All of this means that obtaining probate and administering the estate following a person’s death is set to become much more expensive, with many now looking for ways to reduce the cost. One option is a probate bare trust. Placing an investment bond into such a trust means that it is not included as part of a person’s estate following their death, so they can be cashed in without the need for formalities or estate costs.

While the donor is still alive, they retain the right to all surrenders and withdrawals as the absolute beneficiary. There’s also no inheritance tax to worry about, as the absolute beneficiary is the donor. After the donor has died, all that is needed to pay out is a copy of the donor’s death certificate and a signed and completed claim form from the trustees, as long as there is at least one living trustee. This is usually a much quicker process than obtaining probate, taking only a few weeks in most cases.

Not only does a probate bare trust remove an investment bond from the administrative side of handling an estate, thereby helping to avoid some of the hefty fee increases, but they can also be used to help relieve the financial burden of inheritance tax. As this needs to be paid before probate is granted on an estate, an investment bond under a probate bare trust can be used as a more readily available source of funds to assist in paying any fees and inheritance tax due.

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