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Banks and solicitors are overcharging consumers small fortunes for sorting out wills and small estates. Tony Levene meets Britain's first 'probate broker'
Just because you're dead does not stop banks and lawyers making a fortune from you. Each year Britain's high street banks and solicitors pick up a massive £1.25bn in fees for sorting out wills. Between them, they have 88% of the market for dealing with that last testament.
But according to management consultant* Adam Walker, 49, around half of that £1.25bn is "blatant overcharging".
"It's a £600m a year rip-off, where banks and solicitors are charging large fortunes to sort out small estates. It's worse because they prey on grief-stricken families who are not in a mood to argue, or shop around," he says.
And Walker should know. His experience* with a London law firm last year, when his father died, caused him so much anguish that he decided on a solution – he has set up what he says is the UK's first "probate broker" – probate* is the legal term for sorting out a will (see What is probate, below). His brokerage aims to find the best deal for families who need to arrange processing of a will.
Walker's father died last May leaving all his £550,000 estate to his widow. There were no other bequests or inheritance tax to pay. The estate consisted* of the £300,000 family home, a £200,000 holding in Alliance, an investment trust, and four savings accounts worth £50,000.
Adam and his brother, who were both named executors in the father's will, thought the cost of sorting this out would be "no more than a few thousand, at worst".
But there was a third executor in the will – a firm of London solicitors. And they could charge "professional fees".
"I won't name them – I've since *discovered they are no better, or worse, than any other. But I thought it essential to know, upfront, what their fees would be – after all, whatever they charged would come out of the money left to my mother," he says.
It took him a lot of pressure to gain information. "The firm refused to give a quote, basically using the 'how long is a piece of string?' line. But eventually the lawyer said she would charge 1.5% of the estate, plus £325 an hour, plus £20 a letter, plus disbursements such as court fees plus VAT – the likely total would be £25,850. We were shocked – it was more than twice as much as they paid for their house, and this was a very simple estate," he says
He suggested to the firm of solicitors that the family do the basic work (he'd bought a do-it-yourself probate book for £15) and get the lawyers to check it as a way of costcutting.
That suggestion fell on deaf ears.
Walker then asked if he could look for alternatives. "The lawyer said that as the firm had been appointed, it had to act for us. In any case, it claimed a bank would have been even costlier. But I discovered anyone – solicitor or otherwise - can renounce an executor appointment. I also found an online probate firm which quoted £6,300 – some 75% less."
Walker then moved from "angry to apoplectic". He told the lawyer the job was hers at £6,300 and if she did not like it, she should resign – if she refused, he would be a "hostile client". "I threatened to ask the Law Society for an independent assessment of the fees." She then resigned as executor.
"Lawyers and banks make you feel guilty even if you have the strength to challenge them after a death in the family," Walker says. "The problem is, so many lawyers and banks offer will-writing as a loss leader and put themselves in as executors so they can make a fortune from the probate process after the death when the family is vulnerable."
Walker did the probate work on a DIY basis – you don't legally need a lawyer. "It wasn't that easy, but my secretary helped with the paperwork. It took her 25 hours, five less than the lawyer quoted, and I do not pay her £325 an hour. The original charge was a big try-on."
His solution was, with £2m backing from a private investor, setting up Final Duties – which he says is the first ever "probate broker". He claims he can typically halve solicitor fees and cut bank costs back by 75%.
"You come to us and we give you a quote. All our work is via solicitors but, because we know the market, you don't overpay. If you accept, you pay us £295 – and we use our experience to help get rid of unwanted executors. We've done nearly 100 so far – I'm surprised no one has done this before."
Final Duties's record includes:
• A South Wales man, who left £1m in a bank account and nothing else, would have been charged £40,000 plus VAT by Royal Bank of Scotland. Final Duties ensured the bank resigned and found a lawyer for £3,200.
• A Devon man appointed Midland Bank (now HSBC) as his executor when he married in 1954. He left £300,000 – the bank wanted £12,000. Walker did it for £2,800 after securing the bank's resignation as an auditor.
• A London man was quoted £19,000 by a bank to administer his father's estate. The bank refused to reduce the fee even when the son offered to do some work. Final Duties quoted £7,245.
"Lawyers lost out when they lost the conveyancing monopoly. But here the margins are much fatter. It's time to change," Walker adds.
What is probate?
Probate is the legal process that takes place after someone's death.
It usually involves proving that the deceased's will is valid, identifying the deceased person's property and having its value appraised, paying any outstanding debts and taxes including inheritance tax, and distributing the property according to the will or, sometimes, according to law.
The process tends to last several months and can sometimes take many years where the estate is complicated.
Those with the legal duty to carry this are called "executors" and will be named in the will. If there is no will – dying intestate – the courts will appoint administrators.
If the deceased person left a small amount of money (usually £5,000 or less), it may not be necessary to obtain a grant of probate or letters of administration to withdraw money from the deceased's account with a bank or financial institution.
This can be useful if money is needed from the deceased's estate to pay for immediate expenses such as the funeral or house insurance.
Each bank or financial institution has its own rules on what proof it requires, and how much money it will release to the person acting in the estate of the deceased.
Probate best buys
Banks and most solicitors nearly always charge by a percentage of the estate's value – irrespective of the work involved.
Many banks charge a flat 4% (plus VAT) of what is left in the will. Barclays has a more complicated scale – its fees are 4.5% of the first £100,000, 3.5% of the next £400,000 and 1.5% of anything over £500,000.
In addition, it charges £400 for every beneficiary and £75 for each asset (or 10% for assets under £750).
Solicitors who charge according to the value of the estate, rather than the work involved, usually bill for around two thirds of what a bank will cost.
These fixed sums can occasionally cut the costs if the will is very complex – such as very many bequests or a large number of difficult-to-value assets, but generally it works against the family's interest.
But there are alternatives.
Firstly there is Final Duties, profiled above, who can be contacted at finalduties.co.uk or 0800 731 8722.
The Share Centre, a low-cost stockbroker, has a plan that promises "financial certainty" to grieving relatives faced with winding up the estate of a deceased person.
Instead of handing the work to solicitors, who can charge by the hour leading to a potentially open-ended bill, The Share Centre has a tie-up with probate specialist Kings Court Trust Corporation.
This will offer a fixed-fee service, based on the amount of work required, with the bill clearly shown upfront during a no-obligation meeting.
Some solicitors feature fixed fees. Birkett Long in Chelmsford, Essex, offers probate on an estate worth less than £300,000 for under £600 while The Probate Bureau in Ware, Hertfordshire has a fixed-price promise.
Families can reduce bills by doing some of the work themselves where possible.
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