Probates: how much is too much?

Probates: how much is too much?

Ilott v Blue Cross - The Final Curtain

A balance needs to be struck between the time-consuming and occasionally costly process of applying for a grant of probate on the one hand, and the possibility of placing vulnerable people at greater risk on the other.

It has been an ongoing gripe that banks and building societies are too strict when it comes to releasing funds when someone dies. In most cases, financial institutions require the executor to obtain a ‘grant of probate’ before closing and distributing money in a deceased’s account. A grant of probate is a document issued by the court that confirms the executor’s authority to deal with the deceased person's assets.

Probate will only be granted once the executor has completed an inheritance tax return and satisfied the court about the deceased person’s estate. This can be a complex and time-consuming process, so it is in the beneficiaries’ interests if funds can be released without a grant.

The strict approach hasn’t necessarily been the fault of the banks. Current laws only permit some financial institutions to release up to £5,000 without a grant. HMRC guidance also states that the maximum amount transferable without a grant should not exceed £5,000. This limit, which has been in place since 1984 and is therefore unreasonably low in today’s money, is in HMRC’s interests, as any funds released without a grant could mean that inheritance tax is going unpaid.

The COVID-19 pandemic, however, has given banks the impetus to extend their financial limits. In particular, over the last few months, there have been reports of banks releasing up to £125,000 without a grant of probate. This is a drastic change that in many ways should be applauded.

At a time when money has been tight for a lot of people, swiftly releasing much-needed funds could make a significant difference for struggling families. Financial institutions themselves have said that they want to make things as easy as possible for bereaved families, particularly when the usual face-to-face support is not generally a viable option.

But has this change been properly thought through?

Some people unfortunately see death as an opportunity to commit fraud, with grieving relatives who are often elderly and vulnerable potentially being targets. A grant of probate offers a degree of protection, as the process to obtain one helps to ensure that the person collecting the assets is the person entitled to do so.

Additionally, grants of probate now include a high-security hologram expressly to counter fraud. In contrast, where banks don’t demand a grant it is easier for someone to falsely to claim to be an executor or beneficiary of an estate, for example by producing an out-of-date will or even claiming that no will exists at all.

Banks should (and do) have processes in place for releasing funds without a grant, such as requiring copies of the death certificate, a certified copy of the will, or sight of the executor’s ID. However, such measures are by no means foolproof.

Another concern is the relaxed approach banks seem to take with solicitor firms. In these instances, accounts have been known to be closed and proceeds distributed without any documentation aside from a letter with a law firm’s letterhead.

Additionally, if someone is able to fraudulently acquire funds from an estate, there are further concerns about how the real executor and beneficiaries can attempt to recoup those funds.

So what can beneficiaries do to protect themselves? 

One step is to ensure that the true executor is identified quickly. This allows beneficiaries to hold the executor to account so that they know the deceased’s assets are being looked after properly. It is also important that the executor and family members contact the relevant banks and building societies quickly, so that their details are on the bank’s records.

However, inconsistency between banks compounds the problem. One bank might be willing to release £100,000 without a grant, yet another may demand one before releasing £30,000. It is very easy to find out what each bank’s current financial limits are. Fraudsters can therefore concentrate their efforts on banks that are willing to release higher sums, perhaps also with less stringent protocols.

What’s the answer?

There is an acknowledgement in the banking community that a consensus needs to be reached about what a reasonable financial limit should be. A balance needs to be struck between the time-consuming and occasionally costly process of applying for a grant of probate on the one hand, and the possibility of placing vulnerable people at greater risk on the other.

A limit of £5,000 is clearly too low, yet £125,000 may be too high given the opportunity it offers fraudsters. Hopefully, a sensible middle ground can eventually be reached, but in the meantime, the best beneficiaries can do is remain vigilant and act quickly after a death to protect themselves from fraud.

First published on Money Observer. Reproduced with permission. 


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