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Increase in probate fees could cost sector annual £16m in legacy income

Melanie May | 16 March 2017 | News

Changes to probate fees could cost the charity sector almost £16m (£15.8m) a year, according to calculations by Legacy Foresight.
The increase in probate fees on legacy income will results from the switch from a flat fee system to a banded structure where the fees increase in line with the value of the estate, up to a maximum of £20,000, as approved by the Ministry of Justice on 24th February, following a consultation period.
The changes are part of a drive to reduce the cost of running courts and tribunals, and raise an estimated £250 million for the Exchequer.
Legacy Foresight used its Legacy Market Model to assess the impact of the proposed increase in probate fees on charitable legacy income. It calculates that the amount lost to the charitable sector (in today’s prices) will be £15.8m a year, representing 0.6% of the total legacy income received by UK charities.
Under the new rules, it estimates that the average probate fee paid by an estate that includes a charitable bequest will increase from £155 to £2,650 – a net increase of £2,500.
According to Legacy Foresight, the proposed changes will primarily affect the value of the estate residue, paid out to beneficiaries once all pecuniary (cash) gifts have been bestowed. It is this residue that may be split into a number of bequests, left to beneficiaries including family members, friends and charities.
Legacy Foresight also estimates that charities’ share of the additional probate fee in estates that contain a residual bequest will be 42% with the remainder borne by other beneficiaries. This represents an average reduction of £1,050 of charity income for each estate containing a residual bequest.
However, Legacy Foresight also predicts that the losses will be outweighed by growth in total income over the next few months.
Meg Abdy, director of Legacy Foresight said:

“Although £16m may sound a lot, it is very small in relation to the value of legacy giving overall. In today’s buoyant legacy sector, such losses will soon be outweighed by total income growth over the next few months.”

Remember A Charity and the Institute of Legacy Management are among those also highlighting the potential drop in income the changes will cause. The Institute of Legacy Management predicts a slightly higher loss of £18m a year, with both voicing concerns regarding the possible detrimental effect the changes could have on legacy income.


An introduction to AI for charity professionals by Ross Angus