Recent Law Updates (sector related)

Probate changes: online applications compulsory for professionals and fee increase proposed.

Probate applications have moved online in the Non-Contentious Probate Rules 2020. Using MyHMCTS to submit applications for probate or letters of administration has been mandatory since 30th November 2020, having been introduced before the pandemic in early 2020.

Probate means sorting out a deceased person’s estate, which includes property, money, and possessions. A probate application is to give executors of a will the authority to deal with the assets and carry out the wishes of the person who passed away. It is usually necessary if the estate of the deceased is worth more than £10,000, and if assets were not jointly owned with the person applying.

There are several exceptions to the online system, including when there are multiple applicants entitled under intestacy, Trust Corporation applications, and Grants to Attorneys when the attorney is not an existing probate professional able to use the online service.

Changes to the probate service are planned from 19 August 2021, based on feedback. This will include: being able to amend all parts of a probate application; that trust corporations can apply using it; and that it can be used where only a notarial copy or a court sealed copy of the will is available.

The Ministry of Justice has proposed an increase to the fee to apply for a grant of probate. The proposals, published on 8 July 2021, changes the price from £155 for probate professionals and £215 for individuals to £273 for all applicants and for estates of all sizes.

The government says this is to ensure the service does not operate at a loss which has to be subsidised by the taxpayer. The Ministry of Justice say that this change will not generate any profit, and also removes the “unjustified” discrepancy between professional and non-professional applicants.

The Law Society has denounced the increase in fees, in light of “significant delays” to the service which has harmed grieving relatives. They report that in 2020, people had to wait 12 to 14 weeks on average to receive their grant of probate. The delay increased significantly during the winter of the pandemic, amid a surge of applications.

The consultation on the increase in fees will run until 23 September.

Impact of the Fifth Money Laundering Directive on UK trusts

New rules were introduced in October 2020 which extended the UK Trust Register to all open UK and some non-UK trusts, regardless of whether they pay tax, with some exclusions.

This was part of the UK implementing the Fifth Money Laundering Directive (5MLD) from the European Commission.

All non-UK express trusts that acquire land or property in the UK, or have at least one trustee resident in the UK and enter into a ‘business relationship’ within the UK, must register.

An express trust is any trust which has its conditions set by the person making it, the settlor, rather than in a legal process in court.

Exemptions for trusts are listed here. They include personal injury trusts, trusts for vulnerable beneficiaries, trusts holding money or assets of a UK-registered pension scheme, and charitable trusts.

Trustees have approximately 12 months to register from when the new service is ready, which will be later in 2021. Trustees will have 30 days from the creation of a trust or from the date of any changes to the beneficial owners to report relevant information, after the new service is ready.

This increases the work necessary for individuals and financial service firms to be compliant. Funds Europe reported in April 2021 that firms are only 60% through their implementation programs.

The UK government states that information will only be released in “certain limited circumstances”, cases of people working in the field of anti-money laundering, counter terrorist financing and associated offences. There had been fear that 5MLD would increase personal information available to the public, as expressed by Richard Frimston at Russell-Cooke.

5MLD reflects fear about tax avoidance and evasion, through addressing holes in previous transparency regulations. One change is that cryptocurrencies, art market participants, letting agents, and tax advisors must follow the same rules as traditional financial institutions.

The Fourth Money Laundering Directive, which came into force in the EU in June 2017, was an attempt to exchange more tax information because of concern about offshore jurisdictions.

The EU is less apt than English law to use trusts to solve issues, and therefore 4MLD and 5MLD prefer other legal structures. 4MLD was the first to direct trusts to collect information from trustees and beneficiaries and make it available to authorities. The EU’s 5MLD requires all trusts, regardless of tax consequences, to report to the Revenue.

The UK’s Trust Registration Service manual contains up to date (as of May 2021) information about trusts which need to be registered and data retention.

Wills adapt to COVID-19 through technology, but doubts remain over e-signatures

The requirement that two people have to witness a person’s will in-person, according to the Wills Act 1837, has changed temporarily in the Wills Act 1837 (Electronic Communications) (Amendment) (Coronavirus) Order 2020.

Witnesses in England and Wales can now be present via a video call, or in any position which allows a “clear line of sight”, such as through a window. The witnesses need to clearly view the pen on paper and acknowledge their own signature on the same will. The same will document needs to be taken to the witnesses on ideally the same day, so the testator can see them sign.

Electronic signatures are not permitted, however. This is in contrast to transfers of ownership of property, leases, mortgages and other property dealings, which can allow electronic signatures as of July 2020.

The new Wills Act amendment is in place for wills made on or after 31 January 2020 for two years, after which wills have to be witnessed in-person. This deadline of 31 January 2022 can be extended if necessary, in line with other coronavirus legislative measures.

While this amendment is temporary, the Law Commission is in the midst of a consultation on reforming the law of wills, including considering electronic wills and reducing barriers to making wills, to protect individuals and encourage people to make wills.

The final policy has been postponed to prioritise reviewing laws concerning weddings.

Charlotte John, barrister at Gatehouse Chambers, speculates that “remote witnessing is here to stay and that the Order will eventually be extended to become a permanent change to the law of wills”.

However, there are concerns that virtual witnessing can be invalid. Oliver Asha, Head of Legal at Make a Will Online, warns that signing outside of the camera using a front-mounted laptop with an unclear line of sight and poor internet connectivity could invalidate the will.

There is more general fear over moving wills entirely online, because using e-signatures for wills is seen to increase the scope for abuse, in contrast to the security of signing the will in-person with two witnesses.

The Uniform Electronic Wills Act recently passed in the US, which allows testators to create, sign notaries, and execute a valid will online.