What is a pre-paid probate plan?

Over the last few months, there has been a lot of discussion around pre-paid probate plans in the estate planning sector. These types of plans promise to cover the legal costs that are involved with the administration of your estate, giving you certainty over costs and protecting you from possible future increases of professional fees. Typically, they cover the cost of a full estate administration which will include identifying and valuing the assets, preparing the application for the Grant of Probate, finalising the inheritance tax position, cashing in the estate assets, paying liabilities, preparing estate accounts and distributing the estate to beneficiaries.

Whilst this may sound like a sensible way to reduce stress on loved ones, many experts believe that the problems that consumers experienced with pre-paid funeral plans will be repeated.

Pre-paid probate plans are very new to the market and are yet to be regulated. Many of the companies offering these services are not regulated by the Financial Conduct Authority or the Solicitors Regulation Authority. This leaves consumers with no protection if the company ceases trading or if they become insolvent, meaning thousands of pounds could be lost. Lack of regulation could also lead to a lack of transparency around what costs are covered, leading some to believe that they are paying for services which are not included as part of the plan.

The cost of the plans are based on your estate and circumstances at the date they are arranged, and it is unclear what happens if there are changes during your lifetime or if there are complexities which arise after death.

Let’s say Ms A’s estate has an estimated value of £300,000 and she has paid £3,000 + VAT for her plan. Later in life, the value of Ms A’s estate has decreased to £150,000 as she has spent a lot of her savings and has sold her property to move into residential care. Ms A’s policy was costed on the basis that her estate would have a higher value and there would be more work involved, given her change in circumstances this may be too high. There is no obligation for the policy provider to refund overpaid costs, it will likely depend on the individual company and what it states in their terms and conditions.

Conversely, let’s say Ms A had an unexpected inheritance from a family member and her estate now has a value of £600,000. After her death, nobody can locate the original Will to send to the Probate Registry. Ms A’s estate has now increased in value and become more complex. The legal fees to deal with this will be higher and it is likely that the plan will not be sufficient to cover them.

Given the risks highlighted above, it is important to consider pre-paid probate plans very carefully and it may be best to refrain from purchasing them until they become regulated. If you would like any advice or have any questions, please feel free to contact a member of our team today on 0113 207 0000.