“Should I Be Cautious About Pre-paid Probate Plans?”

Probate is something few people think about until faced with it. It’s the process of getting legal authority for an executor of a Will (or an ‘administrator’, if there’s no Will) to deal with the estate of a person who has died. Probate allows them to settle debts, distribute assets and tie up loose ends.

Probate isn’t always needed - if assets are of low value or are owned jointly with others, for example. But where it is, there will be an application process and a cost. The current application fee is £273 for estates valued over £5,000 (no fee if the value is less than that). There may be solicitors’ costs to consider too.

Companies alive to this potential liability have set up ‘pre-paid probate plan’ services. The idea is that people pay for probate in advance, so that that burden doesn’t fall to loved ones once they have passed away. The money is held, ready to be used when the time comes.

As private client solicitors, we encourage clients to plan ahead. But is a pre-paid probate plan a sensible move?

There are some deep concerns. In fact, the Financial Conduct Authority (FCA) has issued a warning to those thinking about taking out this type of plan. It points out that pre-paid probate plans in the UK are unregulated, meaning there’s no regulatory protection if something goes wrong. Particularly concerning, says the FCA, is:

-     The possibility that you’ll lose your money if the pre-paid probate company collapses, as these plans are not protected by the Financial Services Compensation Scheme.

-     The fact that commission is often included in the fee, so you’ll be paying more.

-      That there are no rules requiring your money to be held in trust or backed by insurance (and even where a trust is used, that trust could invest in investments that aren’t suitable).

-  That the Financial Ombudsman cannot help resolve complaints.

The FCA also makes the point that when you take out a pre-paid probate plan, the price you pay will usually be based on the value of your estate at that point. But what if, as can often happen, that value changes? If care costs in later life eat into that value, your estate might fall below the probate threshold, meaning you’ve paid for something you don’t need. Or, if your estate value increases, your pre-paid amount could be insufficient, leaving more to be paid once you’ve passed away.

If you have been approached by a pre-paid probate plan seller, our advice is to be cautious. While in some situations a plan may be worth taking out, in others it won’t. So look into things in detail. Consider what’s being offered and if that’s right for you, taking into account the concerns that exist.

For advice about anything to do with probate, contact us on 01264 353411 or at probate@bsandi.co.uk.