New Year, same problems for the probate sector?

At the end of 2020, many of us would have looked ahead to the New Year with the hope of returning to some degree of ‘normality’. Although we still may need to wait a while longer, 2020 has offered the sector an opportunity for reflection. What – if anything – has changed over the past year and what can we expect for the probate sector in 2021? 

Uptake of Technology

There is no doubt that technology has become part of our lives now more than ever. Whether in a professional or personal capacity, technology has allowed us to stay connected to one another while we need to stay physically apart. The probate sector was no exception and the pandemic has certainly accelerated some of the changes to modernise the sector which before now were only a point of discussion. 

In many ways this has been welcomed. The working-from-home structure provides the opportunity for practitioners to save time, money and be more ‘green’ in their way of working – not only in the probate sector but across the board. 

The concerns surrounding the legalisation of video-witnessed Wills which occurred in September 2020 have continued to be a talking-point, with the view of the Government and practitioners alike being that it should remain a last resort. 

In 2020, a shift was made for the majority of probate applications to be made via HMCTS’ online probate service and at the end of November it became mandatory for probate professionals to submit applications online except in confirmed exceptions. It is safe to say that the online service has had some teething issues and some practitioners are not convinced the service is completely fit for purpose.  

There are still significant delays in processing probate applications. Understandably, this is down to the pure volume of cases as a continuing fall-out of the pandemic. However, practitioners are also struggling to get to grips with HMCTS guidance, which – at least seems to – keeps evolving. On average 35% of probate applications submitted to the Probate Service are ‘stopped’ – i.e. suspended – which usually occurs where the Probate Service note an inconsistency in the application. In light of this, HMCTS has sought to discuss with professional bodies how to make the process more efficient and recently published 5 Steps to a Successful Probate Application. 

Among other tips, the latest guidance for complex estates is to wait 15 - 20 working days from submitting the inheritance tax return (IHT400) to HMRC - and paying any inheritance tax due - before sending the probate application to the Probate Service. The reason being that when the application is received, the Service should have already been notified by HMRC that the application can proceed, thus avoiding any hold-up. 

Can expect a move towards a paperless sector? 

It is inevitable that the use of technology will continue and, to a certain extent, it is more of a question of when certain practices will be digitalised as opposed to whether they will at all. 

Although not currently recognised in the UK, electronic Wills do exist elsewhere in the world and, as a result of the pandemic, are more relevant than ever. There will be much discussion to come surrounding the concept of digital Wills and other documents (such as Lasting Powers of Attorney) but any transition to this becoming common practice is unlikely to be quick or without objection.  

Valid concerns remain in respect of the risks of fraud and undue influence, like we have seen in relation to video-witnessing, and there will need to be careful consideration before any changes are made to our current legislation and the protection it affords. 

Planning for the Unexpected

It is clear that the pandemic has increased public awareness of planning for the future, with an increase in Will and Lasting Powers of Attorney preparation during 2020 and an expectation of further market growth in these areas set for 2021. 

As result of the pandemic many clients have been led to consider the ‘what ifs’ which generally we do not like to linger on too long or often but remain important to think about and plan for. It is this opportunity to think about your future self and your loved ones which has enabled many to take the right steps to make sure they protect their interests and assets both now and for the future. 

It may be that technology has even made doing so that little bit easier. A discussion with a probate professional is only a phone or Zoom call away, meaning clients can freely explore their options from their own home. 

Rise in Disputes Expected 

Throughout 2020, there have been a number of probate disputes making headline news and, sadly, it is expected that disputes will only increase in 2021. 

For one, while the increased awareness in the importance of having a Will in place is welcomed, it may have led to many drafting their own homemade or ‘D.I.Y’ Wills. While this approach may seem easier and cheaper at the outset, it can lead to many a difficulty and great expense should the Will be challenged post-death.  

Video-witnessing and the concern that the measures leave an open door to abuse of the vulnerable members of our society also add to the view among the profession that cases of contested Wills will only increase. 

The pandemic has also had a major effect on our economy and, as such, has had a knock-on effect on many people’s personal finances. This in turn could mean beneficiaries of an estate may have an increased reliance on the inheritance they expect to receive. As a result, we may well see an increase of claims under the Inheritance (Provision for Family and Dependants) Act 1975, should a beneficiary feel that the deceased did not make adequate financial provision for them. 

Increase in Charity Legacies 

There has been a surge in legacy gifting to charity, with an increase of 81% between mid-March – the start of the first lockdown- and June 2020 alone. Many have seen the economic effect lockdown has had on UK businesses and recognise that charities are not immune to the same pressures. 

Gifting to charities in Wills forms a key part of a charity’s income, which has sadly been affected by delays with the probate service experienced across 2019 and 2020. It does however look likely that 2021 could be a period of recovery. In part, this will sadly be due to the increased death rates we’ve seen in 2020. It also looks promising that delays with the probate process will ease. In a statement made in November 2020, HMCTS has committed to clearing the backlog of the estimated 29,000 cases awaiting probate. 

Why leave a gift to charity in your Will?

Receiving a gift in a Will helps to guarantee charities can continue to do the important work they do. It can also be tax-efficient. Any gift to a charity in a Will is exempt from inheritance tax. By leaving a legacy, not only will the charity receive the full amount of your donation but it will also be beneficial to your estate. 

What’s more, if 10% or more of the total estate is left to charity, the remaining value of the estate will benefit from reduced rate of inheritance tax from 40% to 36%. 

Digital Assets - What are they and why is it important to protect them?

With more and more of our daily life turning digital, it is important that when making plans for how our estates will be managed digital assets are not overlooked. 

One area which has hit the headlines already this year is digital assets. A recent survey by the Law Society has revealed that 26% of respondents know what happens to their digital assets after they die – with only 7% saying they fully understand and 19% saying they somewhat understand. It’s therefore no surprise that 93% said had not included any digital assets in their Will. 

What is a digital asset? 

Essentially, a digital asset is any non-physical asset that is stored electronically and you have a right to use. It can therefore encompass anything that exists online or in a digital device. 
Some examples include but are not limited to: 

• Photos, music, films, e-books and other documents (for instance stored in a cloud account) 
• Email accounts 
• Social media accounts and smartphone apps 
• Websites and blogs
• Online banking and investment apps
• Online accounts with monetary value e.g. PayPal or Amazon accounts which hold credit
• Cryptocurrency such as BitCoin
• Online reward schemes such as Clubcard

Digital assets are therefore capable of having both significant sentimental and monetary value. 

While ‘digital asset’ is a wide term and can take many forms, various issues surround to what extent you can be deal with them upon death. There are many online services where you will agree to terms and conditions that can restrict your (and your estate’s) ability to access your digital assets. 

Considering some of the examples above:

• In the case of digitally stored music, you may have a licence to use the content which terminates on your death. 
• When it comes to photos, some social media sites will stipulate that they own the content you upload or deny others access to your account/asset on privacy grounds. 

This does not mean you do not have ownership of your own content. Rather, the consequence is that it can make it more difficult for loved ones and personal representatives to access those assets once you die. 

Why protect digital assets?

Sadly, overlooking digital assets in your Will can mean that family members are unable to access family photos or close their loved one’s social media account. 

It can also have implications in gathering the information required for probate applications. The fact that an asset is digital does not stop it from being an asset and, like physical assets, they can have their own monetary value. If a personal representative is unable to access information stored online, for instance an online bank account, it could seriously hinder their ability to value and properly administer the estate. 

Digital assets can also provide a way for an estate to continue to generate income for years after a person’s death, as seen by the TikTok account recently launched by the David Bowie estate five years after his passing. 

Tips on protecting digital assets 

• Keep a record of your digital assets and, where possible, include instructions on how to access them.

It’s important to note that, for confidentiality, a site or application’s terms and conditions may state that usernames/passwords/memorable information etc. should not be disclosed to others. 

• Check whether the site, application or (manufacturers of) a digital device will allow others access to your accounts after your death. 

Once again, check the terms and conditions! In terms of social media sites, some are known to allow you to appoint a ‘legacy contact’ who will be able to make decisions about your account. 

• Treat digital assets like physical assets and give clear instructions to your executors as to what should happen (or who they should pass to) when you die. 

It might also be worth considering appointing someone specifically to deal with your digital assets – i.e. a digital executor. 

• Back up your digital assets!

We may be in a modern world where everything you need can be stored on a device but in some circumstances, e.g. photos on social media, your content may actually be owned by an online service provider making it difficult for your estate to access. When in doubt, consider a back-up way to store the asset, for instance by printing photos or storing them on a CD. 

It is never too early or the wrong time to consider or review your affairs.