Access to spouse's savings & property.

[mrgazulasir]

The March 2017 Budget has made my wife & me think about the consequences of the massive hike in Probate charges. We are both 69 and have accumulated significant savings, partly as the result of my wife inheriting her parents house, which she still owns, and which has been rented out for the past 13 years or so. Her house is worth in the region of £650 K.

Facing the inevitable, it's likely that one of us will die before the other and we are concerned about access to our spouse's savings w.r.t. the need for Probate.

I would assume that savings held in joint accounts should be reasonably easy and straightforward without Probate, but savings held individually could be more involved.

We have significant savings in ISA's and with NS&I in sole names which would be above the providers internal guidelines for release of funds to a spouse without probate. With the recently announced increased charges, the cost of Probate to allow release of her savings could be based upon the value of her let house, £650 plus half the value of our marital home £600/2 = £300 k plus her savings, so well in excess of £1,000,000.

Whilst we are happy to keep our individual savings in NS&I, effectively giving Mr.Hammond access to cheap borrowing, neither of us much likes the idea of exorbitant Probate fees just to access this money as aforementioned. As a result, we are considering putting everything, savings, investments, wife's house, in joint names so that the only requirement for Probate will be upon second death, not the first as well.

Perhaps there is somebody out there who can help straighten out my possibly muddled thinking on this little predicament.

Thank you, Dave.

[maths]

It is, of course, true that jointly held assets pass by survivorship on death and hence no probate.

However, this may mean that the aggregate IHT charge on both deaths is greater than it might otherwise be. For example, some assets (or parts thereof) could be lifetime gifted to children prior to the deaths of either spouse.

If I may, I think it would be sensible to consider some IHT planning first and then worry about probate costs thereafter (don't let the tail wag the dog or whatever that saying is...). Trusts may be both useful for IHT planning and avoid probate.

[mrgazulasir]

Many thanks for your thoughts Maths. You are quite correct in that shielding children from the ravages of HMRC is of prime importance but unfortunately, we were not blessed in this respect. Cousins kids and charities will do pretty well upon our joint demise.

Our main concern is the difficulty and cost of gaining Probate upon first death in order to release funds from savings held in our individual names. It is our understanding that access to savings held in joint names is a fairly straightforward process.

My understanding is however that for first death, Banks/Building Societies apply an internally set limit on the maximum sum that can be released without the need for probate. It is also my understanding that although spouses property automatically passes to the other upon first death (unless the Will dictates otherwise), in applying for Probate, all individual property needs to be taken account of. Therefore, should my wife predecease me, to get access to her individual savings, I would need grant of Probate which would now be much more expensive as the house she owns in her own right is alone valued in the region of £650 k.

I am of the opinion that rather than having individual savings exempt from Income Tax (ISA's & NS&I), with interest rates so low at present, we would be far better off in the long run by having everything in joint names.

So "are my assumptions correct" is really the question. Thanks, Dave.

[pawncob]

I've just ensured that all our assets (where possible) are in joint names, not just to avoid the probate fees, but to ensure that the survivor doesn't have to apply for probate at all. Joint accounts can be accessed by the survivor (and I'd recommend that they don't ever inform the bank of the death). ISAs may be a problem, but as they can now be inherited, it can be overcome.

[maths]

I'd recommend that they don't ever inform the bank of the death

Why?

[mrgazulasir]

Thank you Pawncob & Maths. I'm coming to the conclusion that all our savings should be joint. Yes there are tax advantages to holding ISA's but these would be outweighed (a) by the cost of Probate to gain access to the funds (we each have FRB ISA's of £65 k & £55 k), and (b) the nuisance of the whole process. We shall take this path as and when our FRBs mature.

Having one name removed from a joint account when the situation arises should be quite painless so we now know how to proceed.

Many thanks to you both for helping to "get our ducks in a row". Dave.