Pre-paid probate plans – the very real dangers explained
People are being urged to think carefully before taking out a pre-paid probate plan to pay in advance for legal fees associated with administering their estate after they die.
The warning comes from the Financial Conduct Authority (FCA) which has seen increased marketing in recent months including a rise in cold callers using high pressure sales tactics to sell this unregulated product.
With no financial protection if the company fails, meaning you could lose all your money, in many cases these plans also include commission which increases the cost of something that may not even be required.
What is a pre-paid probate plan?
Probate is the legal right to deal with someone’s property, money and possessions, known as their estate, after they die. This includes paying any debts and distributing assets in accordance with their Will.
Quite naturally, many people approaching the end of their life want to save their families extra stress when they are gone and this is where pre-paid probate plans can appear appealing.
The selling point of a pre-paid probate plan is that it will cover the legal costs involved with the administration of your estate when you die.
It is usually based on the value of your estate when you purchase the plan but does not take into account any potential changes or complexities.
For instance, probate is not always needed – for example, if your estate is worth below £5,000, if you only have savings or own land or property with other people – rendering a pre-paid probate plan useless and a waste of money.
Conversely, the value of your estate could go up if you receive an inheritance after you purchase the plan. If the value of your estate increases, so will probate fees which the pre-paid plan will not have included,
Why should you be wary of pre-paid probate plans
Since the highly problematic pre-paid paid funeral plan market was finally regulated last summer, the FCA has seen a rise in the number of pre-paid probate plans being marketed.
Some of these companies have sprung from the ashes of unauthorised funeral plan firms which collapsed causing customers to lose money.
Many of the problems previously seen with the funeral plan market are now in evidence with pre-paid probate.
The FCA’s key concerns include:
- Cold calls and high-pressure selling techniques which might push you into buying a product you don’t need.
- No regulatory protections in place and no financial protection because plans are not covered by the Financial Services Compensation Scheme.
- No complaints procedure.
- Commission, sometimes high, often included in the cost of the plan.
- The money you pay in could be put in an unsuitable trust, putting it at risk.
- The executors of your Will will have to use the professional nominated in the plan.
Get in touch
Probate can seem complicated which is why it can seem attractive to try to cover the costs of this in advance.
However, the best way to ensure probate costs are kept as low as possible is to appoint trusted executors – either family, friends or a professional like a solicitor – when making your Will.
Click here to read what we have written recently on the benefits of using a solicitor for probate.
Get in touch
Wards Solicitors’ wins high praise in the 2023 edition of the independent Legal 500 guide of outstanding legal professionals for its exceptional professional service standards and high levels of technical expertise.
Our Wills and Probate Team has extensive and specialist experience in probate applications.
Whether you need a little help, or a lot, we can advise on everything from intestacy rules to disputed Wills, tax implications and inheritance issues.
We offer a free initial appointment for you to discuss what you need and always provide clear cost details up front before starting any work.