Keep your eyes on the road

A new year brings new problems, new solutions and even some surprises. And probate practitioners have plenty to look out for in 2013. For starters, the Legal Services Board (LSB) will follow up its (LSB) consultation Enhancing consumer protection, reducing regulatory restrictions: will-writing, probate and estate administration activities, which closed on 8 November 2012. The consultation was launched following the LSB’s investigations that highlighted “unacceptable levels of consumer harm being caused by the provision of these activities”. It plans to make recommendations early this year to the Lord Chancellor, who will then have three months to decide whether to accept the recommendations. If so, parliamentary time will need to be found to implement any required changes.

The LSB published a consultation document on 27 September 2012 provisionally recommending that ?will-writing, estate administration and legal activities ancillary to them should be made reserved legal activities under the Legal Services Act 2007 and that probate activities should remain reserved. This would mean that will-writing and estate administration could only be performed by an authorised person under the Act and that probate activities will continue to be carried out by authorised persons. For estate administration, the regulated activities will include the collection, realisation and distribution of estate assets.

If the Lord Chancellor decides to proceed on this basis it is likely that significant new burdens will be faced by service providers that are currently unregulated. In addition, the LSB stated in the consultation document that regulated bodies will also have to demonstrate how their current arrangements are fit for purpose to these specific activities.

Non-contentious probate rules

The draft rules are still awaited, but by way of a reminder, a working group, chaired by Mr Justice Munby, was established in July 2009 to consider the revision of the rules. The group was expected to produce a set of draft rules and supporting practice directions during summer 2011. When the working group was set up, Sir Mark Potter, president of the Family Division, said the current rules were far from user friendly, provided little guidance and had not been widely updated since 1987. This is particularly pertinent given the significant advances in technology during the relevant period.

The working group set out its aim: to provide a set of rules that were seen as appropriate for a modern probate service and that permitted changes in practice, procedure and technology without requiring further changes to the rules in the near future. A brief indication in 2011 as to what the draft rules were likely to cover highlighted the main proposed changes as:

• An intention to remove Latin terms in favour of plain English with the intention that the new rules be written in clear and user-friendly language.

• A new style application form to accompany the oath. It was suggested that the rules would permit both paper and online applications, albeit that an online service would not be available immediately.

• The requirement for an oath to be sworn as to the truth of the information to be removed in favour of a statement of truth. Such an amendment is likely to be particularly well received, if agreed, by those practitioners in rural areas where finding an individual to assist with a swear can often be difficult.

• Personal interviews may no longer be routine for personal applicants. It would appear that the probate registry would retain the right to call an applicant for an interview.

• A complete review of attorney applications as a result of a particular concern that a significant number of attorney grants might be used to take advantage of vulnerable persons. One option might be that only probate practitioners could act as attorneys. There is also a recognition that some changes are required post-Mental Capacity Act 2005.

• A revamp of the caveat procedure. The intention being to reduce the number of caveat applications that?are put in without genuine reason. The new process would be shorter and clearer for both lay and professional users.

• At a time when personal ?information seems more readily available than ever, it is expected there may be a review of the information relating to the value of the estate. One option is that the information is restricted and would only be available to proving personal representatives and beneficiaries.

• A review of the availability of ?copy grants and wills, considering various probate registries have indicated they are inundated with requests for copy documentation.

?On a separate note, it would appear, following the simultaneous retirement of many registrars, that the district probate registries may not have sufficient capability to provide probate practitioners with the service they have traditionally been used to. This year will undoubtedly reveal whether more resource is needed.

Banking protocol

The long-awaited Banking Practices Protocol for Estate Administration was finally announced in October 2012. The British Bankers’ Association, the Law Society of England and Wales and the Society of Trust and Estate Practitioners agreed the protocol, which sets out the information that banks will normally require from the practitioner on first contact or shortly afterwards. If the information is provided, delays in dealing with accounts or investments should be reduced. In addition, the protocol sets out the information the practitioner is likely to require from the bank and an outline of how the bank might normally respond to such requests.

Best practice is to suggest that ?all practitioners administering estates obtain a copy of the protocol, be aware of their obligations under it and keep it close to hand.

Presumption of Death Bill

The Presumption of Death Bill 2012–13 received its first reading in the House of Lords on 3 December 2012. This was merely a formality, marking the bill’s journey through the House of Lords. The second reading will involve a general debate on all aspects of the bill.

The legislation will create a single statutory process to obtain a general purpose certificate of presumed death, which will be legally equivalent to a death certificate. This could be issued by the High Court if it is satisfied that the missing person has either died or has not been known to be alive for a period of at least seven years. Practitioners who are trying to settle the affairs of a missing person often face the prospect of the need to make multiple applications to various courts.

Cohabitants’ rights on death

The Inheritance (Cohabitants) ?Bill 2012/13, a private member’s bill sponsored by Lord Lester of Herne ?Hill, received its second reading, which was a general debate, in the House of Lords on 19 October 2012. The bill contains provisions to extend intestacy rules to unmarried partners who have lived together for a certain amount of time. The committee stage, which is a line-by-line examination of the bill, has yet to be scheduled.

The change would be welcomed particularly by unmarried partners whose only significant redress at present may well be a claim via the 1975 Act. Often this can have a significant impact upon the value of the estate, if costs are ordered from the estate after any dispute.

Inheritance tax

The inheritance tax exemption between a UK-domiciled individual and their non-UK-domiciled spouse or civil partner is limited to £55,000. In October 2012, the European Commission formally requested the UK to review this exemption on grounds of discrimination. The £55,000 limit has been in place for almost 30 years and an increase is long overdue. This is particularly relevant given the multicultural society we now live in.

In last year’s Budget, the government announced it would legislate in the Finance Bill 2013. It is understood that the consultation will propose an increase in the exemption from £55,000 to £325,000 and that it will then track any future increases in the nil rate band. There is also a proposal to allow non-domiciled persons to elect to be treated as domiciled in the UK for inheritance tax purposes to secure the full spouse exemption. Such an election may or may not be attractive, but the option must surely be made available.

And the government has confirmed it will review the operation of the inheritance tax death on active service exemption. The announcement was made during a debate in the House of Commons on 17 April 2012. It concerned a former member of the Royal Air Force, who died in March 2010 following a long illness resulting from a military accident while he was stationed in Cyprus at the time of the first Gulf War. The deceased’s family was refused the exemption from inheritance tax under section 154 of the Inheritance Tax Act 1984 because the deceased had not been on active service against an enemy, or on other service of a warlike nature, at the time of the accident.

It is not yet clear what form the government’s review will take, when it will be and whether the findings will be made public. In the meantime, practitioners should be aware of the exemption regarding active service, which can be missed if the right questions are not asked, particularly if the deceased left the armed forces some time before death.

New pre-lodgement enquiry form

The Probate Service has proposed a template form to be used when making pre-lodgement enquiries of a district probate registrar. The Law Society opened a consultation to seek views ?on the form, which ended on 31 December 2012.

Case law trend for 2013

There is no doubt that disputes ?relating to the administration of an estate continue to increase. Practitioners undertaking this who may not have litigation experience should be aware ?of what is expected should ?a claim arise.

Although not new for 2013, practitioners should note:

• Release a copy of the will ?or not?

When a disappointed beneficiary does not have a copy of the deceased’s last will, on the face ?of it they may not be able to have one until the grant of probate ?has been obtained. In the event that the personal representatives receive a proper request by a disappointed beneficiary, the practitioner in question should consider providing a copy as it is not for the personal representatives to determine ?the validity of the claim or ?otherwise. So, take advice from ?your litigation department.

• Disputed wills – Law Society guidance note (6 October 2011)

The practice note provides advice and supplementary information on what to do when a will prepared by you is disputed. The practitioner may be asked to disclose information about the circumstances surrounding its preparation and execution, and the note sets out what information should be disclosed, the consequences of failing to do so and protecting ?the estate.

Lucy Obrey is a partner and Sarah Nineham is an associate solicitor in the private client department at Higgs & Sons Solicitors
 

Note: This article does not constitute any form of legal advice