Following the Institute of Professional Willwriters statement last week regarding its stance on pre- paid probate plans, I thought that as a Fellow of the IPW and an IPW council member that it would be appropriate to elaborate on this to provide the public with more insight regarding why the plans are not supported by the professional body.
Some of you may have not come across these plans, but a number of companies have appeared recently promoting pre-paid probate plans and we expect to see a rise in the number of companies trying to sell them. One reason for this could be that following the demise of the ability by many to receive an income stream from funeral plans, that a replacement for this income will be sought elsewhere. It could be that some companies are capitalising of the public’s lack of understanding of what ‘probate’ actually is, and what the real costs involved are. Whatever the reason, I am yet to find one that makes me comfortable with advising a client to part with thousands of pounds.
Pre-paid probate plans are sold under the guise of protecting your estate from rising probate costs in the future, yet unlike funeral plans where it was clear to see what you would pay vs what a funeral would / was likely to cost, the plans just appear to be ‘plucking numbers’. In real terms, the cost of setting up a pre-paid probate plan (I’ve seen figures for between £2,500 and £7,500) far exceeds the actual current cost of obtaining a grant of probate and administering the estate and any realistic potential rise. You may remember that the attempt at increasing probate fees based on the size of the deceased estate was shot down in flames back in 2019. I can’t see an attempt at a price hike coming anytime soon and certainly not one of any real significance. The potential savings by using a pre-paid probate plan are often wildly exaggerated by the plan providers when compared to actual cost of the average probate administration fee. In our opinion, if you are selling one of these plans to your client you are doing so in the full knowledge that it is not a product that they need, nor will it save their estate money; it really isn’t something that will ‘do what it says on the tin’.
Shockingly, a quick look online shows that some companies marketing these plans with the claim of there being ‘no extra cost at the time of need’ but, when you dig a little deeper one of the costs that aren’t included is actually the probate application fee itself! If that’s not miss-selling, I don’t know what is!
When asked by our clients about probate at the Will drafting stage, we highlight to them that it is something that their executor should be able to manage and assuming that they have chosen a lay person as executor, outside of the probate application fee the costs involved in settling an estate should be minimal. The STEP provisions allow lay executors to get help if needed; this means they are able to shop around and obtain fixed fee quotes and avoid a time costs quote. Whilst there absolutely is value in using a professional for probate administration, the costs incurred by the estate should not be excessive if using a professional who knows how to work efficiently, and these costs should be transparent in what they cover.
This is opinion is shared by Emily Deane, from member body STEP, which sets and upholds standards in estate planning, and she has been quoted as saying ‘‘The best way to ensure that probate costs are kept to the minimum is to appoint trusted executors, lay or professional, when making your Will’’.
With this in mind, encouraging the public to spend thousands of pounds on an unregulated, and barely tested product, cannot be considered best practice. Whilst the funds are apparently ‘ring fenced’ until needed, that due to the unregulated position of these plans the Financial Services Compensation Scheme provides you with no protection, should anything go wrong.
For more information on writing your Will or arranging a Lasting Power of Attorney please contact me on 01903 821010 or via email emma.wells@nsure.co.uk.
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