Following the publication of Prepaid Probate Plans Limited’s open letter to the estate planning profession, Today’s Wills and Probate polled the thoughts of the industry on pre-paid probate and on the company’s plans. Here’s what they said.
Nick Ash, Managing Director, Wills and Probate Services
The pre-paid probate issue came onto my radar at the most recent Professional Standards Board meeting of the Society of Will Writers when the issue of a new provider passing themselves off as recommended by the Society was bought to the board.
Consequently, the Society had to issue a strongly worded note to the provider making it clear that they in no way endorsed or supported the provider and that they should desist immediately from their claims. This was then backed up by a statement from the Society reiterating its long-held opposition to pre-paid probate. Additionally, the Society e-mailed all its members with clarification on the false claims made by the supplier.
The comparison to pre-paid funeral plans, whilst convenient, is disingenuous and misleading.
With a funeral plan, the services you are buying are obvious and transparent. Funerals are broadly the same product at their core: you are buying a coffin, a car to transport it, the services of a funeral director & celebrant & the hire of a venue. Additionally, you pay for the care of the body.
As such, this is all very predictable and relatively easy to project forward as the needs at purchase are unlikely to vary much from the needs at use. You will always need a funeral.
Probate, on the other hand, is not predictable. Your needs at the point of purchase could vary wildly from your needs at the point of use.
Care costs, lifetime planning, or multiple other life changes could mean that you never need probate. Alternatively, hard work or inheritance could mean that your wealth has increased, and the probate process is more complex that when you bought the plan.
Maybe you started a business or sold the business that you had when you bought the plan & used the money to buy a property overseas.
With a funeral plan, what you buy is always going to be what you need. With a pre-paid probate plan, it almost never is. That is why they shouldn’t be sold.
Alex Truesdale, a non-practising solicitor and Managing Director of Alex Truesdale Wills Limited, and IPW member
It’s hard to know where to start with this extraordinary letter from Michelle Kemp of Prepaid Probate Plans Ltd (“PPP”), whose recent entry into the sector seems both ill-timed and ill-conceived.
Pre-paid probate plans offer the worst of all worlds. They lock executors into using a nominated professional, perhaps decades into the future, for a fixed upfront fee paid out of the client’s current resources. For PPP at least, the work covered appears to be limited to basic, non-contentious estate administration only – excluding conveyancing, trusts or variation work – which may not even be wanted or needed by the time that the client has passed away. Frankly, I wouldn’t touch pre-paid probate plans with a bargepole. At least funeral pre-payment plans allow clients to pay for a service which will definitely be needed one day.
Most of all, I’m staggered at Kemp’s call for another self-regulatory association – which the sector in general, not PPP, is to fund. Surely the Safe Hands funeral plan debacle showed that the most effective form of regulation stems from the FCA. Kemp’s suggestion that the FPA was a “successful forerunner” by bringing legitimate operators into the fold ready for full regulation ignores the fact that Safe Hands was able to do the harm it did by operating totally outside of the FPA.
My hopes for the sector are twofold:
- That FCA regulation of pre-paid funeral plans will enable the return of consumer confidence in the product; and
- That the estate planning sector publicly bans the marketing of pre-paid probate plans and leaves entrants such as PPP to make the case directly to the FCA for full regulation without the halfway house of self-regulation. My own association, the IPW, has already made its stance very clear on prepaid probate plans in that it does not support these schemes – as is clearly reflected in its Code of Practice. We cannot allow commercial impatience to prejudice the interests of our consumers.
Karl Taylor, Head of Wills & Probate, Norrie Waite & Slater Solicitors
The more I hear from those involved with pre-paid probate, the greater my concerns. The open letter failed to allay my misgivings about a product that should be banned. Regulation would only validate a product that is not fit for purpose.
The open letter makes clear of one worrying tactic used to sell pre-paid probate when it refers to “blank cheque” fees from other providers. The “blank cheque” argument is nonsense as it is only knowing exactly what an estate includes that will lead to proportionate fee quotes. There is no “blank cheque” and to say so is misleading.
Pre-paid probate cannot provide accurate fees as the requirement for probate, or the extent of estate administration required if probate is not needed, which can only be determined accurately at the relevant time. Depletion of assets, legislative changes etc mean probate may not be necessary, or only a small amount of administration required. It’s a service based on need at the appropriate time, not decades away.
All of us who care about this fantastic industry, which is filled with great people, should do all we can to see off pre-paid probate as I am concerned we could see another scandal.
Helen Eynon, Director, Wills-etc
In a will, I appoint a client’s executors and trustees, who are people who the testator knows and trusts. Then it is the executors & trustees who can decide:
- Do they need professional help with probate?
- To what extent do they need such help? It might be just one part of the work.
- Plus, I cannot see how PPP could work with a professionally appointed executor.
To take away the flexibility of a testator to choose executors, who can then choose how to deal with an estate, would be to usurp the role of an executor.
Any comparison to funeral planning is in my view mistaken. In my eyes there is a difference between a funeral plan and what you are proposing. In a funeral plan with a well known provider my clients know precisely what they are paying for. You are asking to be paid for a future serve which just cannot be quantified.
When a new service or product comes into to existent it should be solving a problem. I see no NEED for PPP’s proposed service.
Trevor Worth, Chair of the BEST Foundation
Whilst innovation and new business models are undoubtedly welcome in any sector – especially in the sometimes grey old world of legal services – we all have a duty of care to our clients to uphold.
As an organisation that prides itself on innovation and business development for our members, we strive to look at every opportunity that is presented to us in a fair and open-minded way with due diligence and with consumer protection at the forefront of our minds.
Whilst the main question has been answered in relation to the trust funds being held independently, we have all heard this before from the pre-paid funeral sector and we all know how that has panned out. Enforced regulation of that sector has uncovered some pretty large gaping holes. This may have gone on for many more years had funeral plan providers not been brought to task.
As an Advisory Panel we have no confidence in the pre-paid probate offering as it offers no guarantees to potentially vulnerable clients and it is a charter, yet again, for the wild west to return wearing a new Stetson. We need to have security for all of our clients, and how on earth does anyone know that they will need probate in the future anyway?
The legal profession needs to stand together on this and it is so encouraging to see so many industry leading professionals calling this out on LinkedIn. We need to protect our clients, our businesses, and the reputation of the estate planning sector.
Sara Sheppard, SLS Wills and More Limited
The issue surrounding pre-paid probate plans has been looming large in the minds of most estate planners/will writers for a few weeks now, and when the Best Foundation published the open letter from Pre-Paid Probate Plans Limited, I was horrified to see that these companies still believe such plans are viable and in the best interests of clients.
The main difference between funeral and probate is that we all know we will need a funeral, but not everyone needs probate, and therefore why pay for something that you may not need? They are using scare tactics to frighten people into believing that they need to put these products in place, but if clients seek advice from a reputable adviser, they would understand the process about probate so much better and realise that these plans are not necessary.
The costs of these plans are not cheap as they will have built in a commission to be paid to the salesperson and we know that the FCA does not approve of high commissions.
The client’s family is obliged to use their preferred legal adviser – this is taking away the choice from the family to appoint their own preferred adviser or to be able to deal with matters themselves.
Finally, who knows if these companies will still be in existence at the point of need. Knowing the history of the people behind these companies, makes me think that these companies will go the same way – out of business.
I do not know any solicitor or Estate Planner that is in favour of such products, and I personally will not recommend these plans to anyone. They are unsuitable and the sooner they are completely banned the better in order to prevent clients being hoodwinked into something they may not need at any point.
Paul Stanford, Director, Stanford Legal Services
We have all seen what happened to the Funeral Planning market with monies supposedly ringfenced in secure trusts and independently managed by trustees so that on the event of failure of that business then client plans could be paid out.
Unfortunately, due to the reckless management of some businesses operating in the sector, we now know this did not always take place.
Self-regulation does not therefore appear to work.
The product in itself and the commissions paid were not really the problem. The products were often very good – it was the management of the trust funds that was the issue.
There are many parallels that could be drawn to the pre-paid probate plan market and that of the pre-paid funeral plan market. However, there is one key difference and it is my personal opinion that pre-paid probate plans are a poor product, unlike the funeral plans.
It is for this reason that I will not be promoting pre-paid probate plans.
Darren Leggett, Managing Director of Property Ladder Group
As someone who operates alongside legal professionals and not as a solicitor or probate practitioner, my view comes from a slightly different side of estate administration.
Property is usually the largest asset within an estate, and we all know how property prices fluctuate.
We have seen prices raising for the last what, 10 years? We are now seeing things toughen up slightly. No one predicted that we would have a war on our doorstep, that Government would be in the chaos it is, and that the financial city of the UK would be shifting to Manchester from London.
All of these factors, plus hundreds of other intertwined equations, can have huge bearings on property prices – both positive and negative.
Look at the crash between 2007 and 2009 – it was catastrophic! This was led, as we all know, by banks lending irresponsibly. Again, one of many potential reasons for a future crash – maybe not reckless lending due to the new financial guidelines put in place since, but maybe for the extreme opposite reason. You cannot buy if you cannot raise the funds!
So, let’s look at the property side of probate. To be incredibly simple about this, you cannot budget for something if you have no idea as to what the costs are. Property is possibly one of the most influential factors in the cost of estate administration.
I remember once upon a time that selling a property would cost the Vendor anywhere between 1.75%+VAT and 3.9%+VAT. Nowadays, you couldn’t imagine paying that sort of money to a sole agent, but in a challenging market some estate agents will start to charge more – for their own survival if nothing else – and if they are the only agent in the area, consumers will have little choice.
Then there is other property related factors, such as lifetime mortgages, or maybe care costs that require covering.
What if the property is overseas and requires further assistance with translation and a legal system that will mean there is a need of another professional based either in that country, or the ability to practise there at least.
There may be a portfolio of property, there could be lease problems on one or more of this portfolio. There may be tenants in situ and there is no contract for any of them.
These are just a few real scenarios that I have been involved in sorting over the years – with some of them really throwing cost and chaos into the mix.
So, does the pre-paid probate percentage actually cover all of the above? If the answer is yes, then the majority of people will be overpaying, at these are not “everyday” problems. If not, then it is not fit for use.
In my own humble opinion, with the introduction of products that provide financial assistance to those executors and estate administrators that require it, at reasonable rates of interest, there is no need for anyone to pay at the kind of rates I have seen being discussed.
In fact, the client would be better off saving the money at the rates I’ve read in a high interest account – at least that way it is safe and accessible upon request. £2,500 sign up. 1.95% probate cost. £30pcm. That is a lot of money.
To be clear, I am not “attacking” anyone. I have no agenda and if prepaid probate was to go ahead it would hold no bearing over my day-to-day business.
For me, I am assessing the situation from the position of someone that is respected in the property world, and has himself introduced new ideas to the sector.
In fact, in complete transparency, I have spoken to numerous leaders in the Private Client world a few years ago to discuss PPP, and whether it was a viable idea.
The fact we all concluded after multiple meetings that it is not, for the reasons I have provided – plus many more – says it all.
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The views contained within this article represent those of the submitter(s) and not those of Today’s Wills and Probate. Today’s Wills and Probate will extend a right of reply to providers of pre-paid probate in due course and offer them a platform to publicly address the industry’s concerns.
