Pre-Paid Probate Plans – Consumer Warning

Most of us are aware that you can pre-pay for your funeral and for many this is a good idea. You can stipulate what you would like to happen and fix the cost now avoiding the increases which will naturally occur over time. The same cannot be said of Pre-Paid Probate plans.

What is Probate?

It is important to understand what we mean by probate and how this can vary dramatically from one estate to another.  We tend to refer to ‘probate’ when in fact we mean the administration of an estate either with or without a Will. This may involve applying to the Probate Registry for a grant of probate where there is a Will or a grant of Letters of Administration where there is no Will.

If you are appointed as the executor of a Will or you are the administrator where there is no Will, you have a choice as to whether to administer an estate yourself or employ a solicitor.  The role can involve many of the following aspects:

• Establishing the assets and liabilities of the deceased
• Working out if tax is payable
• Applying for a grant if required
• Paying all debts, expenses and fees, solicitors costs and probate fees
• Distributing the estate in accordance with the Will or the law of intestacy if no Will
• Establishing and administering any trusts that arise.

How do the plans work?

Most plans are based on the value of your estate at the time you take out the plan and are designed to cover the legal costs but not the disbursements such as the court fee.  The problem with this is that an estate can be completely different in its size and nature when the time comes. 

You may have come into money taking your estate from a non-tax paying estate to a taxable one – the additional costs of administering a taxable estate are usually not covered by the plan. 

Conversely you may have had to go into long term care taking a taxable estate down to a non-taxable estate with no refund for any overpayment.

As stated, the plans do not cover disbursements and so this is an expense the estate will still have to find.  This will include the court fee which is currently £300. 

Consumer Beware

No Regulation

It is important to understand that there is no financial protection with such plans as they are not regulated.  This means that if the company who sold you the plan goes out of business, you would not be protected by the Financial Services Compensation Scheme and it is highly likely you will have lost your money.

Many firms that formerly sold pre-paid funeral plans who, following the introduction of regulation, did not get authorization from the Financial Conduct Authority to continue selling such plans, have started marketing pre-paid probate plans instead.

No Complaints Procedure

In addition, there is no complaints procedure and no recourse to the Financial Ombudsman Scheme.  You may be able to complain to Trading Standards if you feel the company has broken the law or acted unfairly.

High Commission and High-Pressure Sales Techniques

There have been reports of high-pressure sales techniques and cold calls which can result in you buying a plan that is not suitable for your needs. 

Commission is often included in the cost of the plan which increases the cost to you. This is often at quite high levels.  Although banned when it comes to pre-paid funeral plans, this is not the case for pre-paid probate packages. 

Lost Funds

Many such companies will put your money into a trust which the company will claim protects your investment even if they do go out of business.  There are reports however of such trusts making unwise investments putting the funds at risk.  This happened in relation to pre-paid funeral plans before the industry was regulated. 

You May Not Need Probate

Not all estates require you to take out a grant.  The following are three examples where this might be the case:

• The majority of the estate comprises of jointly held assets that pass by survivorship to the surviving co-owner
• The estate in the sole name of the deceased is minimal amounting to no more than £5,000
• There are only bank accounts with balances of not more than £50,000. 

In each of the above cases the cost of a pre-paid probate plan would be a waste.

What You can do to Help Keep The Cost of Probate to a Minimum

Making a valid Will and appointing executors can make the administration of an estate quicker and more efficient, as can informing your executors they have been appointed.

Establishing the assets in an estate and identifying the beneficiaries are two aspects which can seriously increase both the cost and time it takes to complete but if you can help avoid this by keep an up to date list of your assets and ensure that all the contact details for your beneficiaries.

Contact us

Our Wills team will be happy to guide you through everything you need to plan for your future. Simply give us a call on 01543 420000 and ask for one of our Private Client Team.

Catherine Elliott, Helen Jolly, Helen Phillips, and Lisa Edge are all on hand to help you.

If you prefer, please email us on office@keelys.co.uk or fill in our online Will questionnaire by following this link Wills Questionnaire – Keelys Solicitors LLP