Final Duties unveils pre-paid probate plan

Lindsey White
ftadviser.com – 19/11/09

Probate broker Final Duties has teamed up with Funeral Planning Services to launch the UK's first pre-payment probate plan, which it says is designed to allow families to better shield the value of an inherited estate.

Similar to pre-paid funeral plans, Final Duties bases its fees on the amount of work involved in handling an estate as opposed to the value of the estate.

The plans are paid for before the death so the fees are no longer part of the estate. This reduces the value of the estate for inheritance tax liabilities. Unlike funeral charges, probate fees cannot be deducted from the estate when they are incurred after death, said Final Duties.

The pre-payment plan can be taken out at any time in a person's life. Fees are held by an independent trust that guarantees the services will be provided when needed. The costs of preparing a new will or reviewing an existing will is included in the plan.

The plans will save families money when handling the estate of a family member. From a £200,000 estate, for example, a typical bank's 4 per cent pre-payment charge would take £8000, a typical solicitor's 2 per cent charge would take £4000 and Final Duties’ Funeral Plan would charge £1631, according to Final Duties.

Adam Walker, managing director of Final Duties, said: "Every year, over 100,000 people now fix funeral costs with pre-payment plans. This gives substantial comfort to their families who know there will be no need to find funds at a time of grief but is also a guarantee against price inflation.

"The Final Duties pre-payment probate plan means families will preserve more of the estate, paying less and keeping the fees out of the inheritance tax net while also protecting the estate against legal costs inflation.

Mr Walker said Final Duties can generally quote probate fees at a fraction of the 4 per cent of the value of the estate plus-VAT that banks typically demand.

He added: "Because pre-payment avoids inheritance tax, the real savings are even greater – a £5000 pre-payment plan is effectively £3000 once the IHT is factored in. Professional advisers must consider pre-payment as best advice when advising those drawing up wills.”

Tim Purdon, managing director of Ayrshire-based Paladin Financial Services, said: "I encourage clients to have a solicitor and as with me, build up a relationship with that legal adviser. Personally I want to deal with someone I know and trust just as I hope clients consider looking to me for financial advice on that basis.

"It is my intention to work with solicitors draw up arrangements that meet the requirements of the client so that his/her estate is distributed in accordance with their wishes. In the meantime it is my function to try and reduce the inheritance tax liability.

"This plan will have its place and may appeal to those who do not want to deal with a solicitor. I do not consider it appropriate for the wealthier, more sophisticated investor."