Why accountants are better placed to deal with probate
Over the last few months or so whilst we have been finalising our application to the ICAEW for a probate licence we have discussed how we can offer this new service to our existing clients but also to future clients who would ordinarily use a legal firm to deal with a close family member’s probate and related inheritance tax return.
Based on my experiences over the last 30 years I feel that accountants are well placed to do this work for various reasons including the following:
We have an existing and regular relationship with the client, often over many years through our annual contact on their self assessment tax returns.
The information which we receive from this work often forms the backbone of the details to be submitted on the inheritance tax return form and can avoid unnecessary questioning of executors when trying to establish the precise assets and liabilities of the deceased. Additionally, we enquire about lifetime gifts made by our clients and as a result have an up to date record of all such gifts “as they happen” and are not asking for information about such gifts many years later.
Where the client is involved in business either as a shareholder, director or employee we have full information from our annual accounts and audit work about the specific business and are in a much stronger position to claim appropriate reliefs like Business Property Relief (BPR) or Agriculture Property Relief (APR) based on our knowledge and detailed understanding of the business.
We also have much wider contact with the family of the deceased compared to other providers of Probate Services.
In our work on accounts and tax for many SME clients, we build up through our ongoing work, a good rapport not only with the deceased client but also with their close family and relatives. This puts us in a good position to deal with the Estate distribution, not least when it involves the company shareholdings and at the same time it puts us in a strong position to spot potential “pressure points” so far as any family disputes are concerned.
With this team approach across the various disciplines; audit, tax and now probate we are well placed to give a comprehensive service and make significant efficiency savings by not requesting information which is already held on our files.
Getting the paperwork right
It cannot be easy for many individuals acting “personally” to complete the inheritance tax forms which are now required for many deceased clients owning a mixtures of assets including private residence, quoted shares, family company shareholdings, pensions etc.
We have often seen client’s attempt this paperwork and whilst trying to do the best job possible there are pitfalls for many who seek to attempt this work “without professional support”.
Recent examples we have seen have involved the incorrect use of valuations on trading premises, which did not take into account the exact purpose of the valuation (i.e. for inheritance tax purposes) and instead used a valuation for bank security purposes. Additionally, the requirement to give a full history of lifetime gifts in the seven years preceding death can often baffle many clients not least given the interaction of the many inheritance tax reliefs and exemptions.
The consequences of both these issues were that inheritance tax liabilities initially calculated exceeded the correct amount and in one instance by over £100,000!
My experience in dealing with Trusts, Estates and Probate over 30 years is that when it comes to probate matters many providers of this service are somewhat “opaque” on the costs of dealing with these matters. Some providers charge quite high hourly rates for what is often administrative work whilst also charging a “fixed percentage” on top based on the gross value of the estate.
Whilst there is a need to have a fee which is sufficient to cover the work involved it is clear that many providers of probate services do not really wish to be as “transparent as possible” and offer the most cost effective service.
With many accountants now entering the probate market (there are now over 250 firms registered) this should help drive down costs for many families and ensure that beneficiaries receive a transparent and efficient service based, ideally on time spent on an Estate, and not a percentage or arbitrary fixed fee based on the gross Estate.
For the record, at Garbutt + Elliott we will be charging fees based on “time spent” on a probate matter and this will encompass separate fee rates for administrators, probate seniors, managers and partners. We believe this segmentation of work will be cost effective in most instances but where requested a fixed rate fee quote is also available.
Following the de-regulation of the Probate market under the auspices of the Legal Services Board it will be interesting to see whether their hopes of driving down costs for dealing with probate is achieved. I believe it will because new entrants into the market will, by their very nature, increase competition, drive down inefficiencies and improve the costs position for many families who are left dealing with the financial affairs of a loved one.
Please contact us for more information on our probate services at: firstname.lastname@example.org – 01904 464 100 or fill in our contact form below: