After the loss of a loved one, the responsibility of being appointed an executor can feel overwhelming. As a result, many may consider the convenience of pre-paid probate plans. However, they do come with significant risks. Philip Pamment, Chair of the Advisory Board of BEST Foundation, looks at the risks of pre-paid probate plans.

What is pre-paid probate?

Some companies in the UK are offering their clients a service where they can pay a set amount which covers all the fees and work associated with carrying out the probate process after they have passed away.

Fees are usually based on a percentage of the value of that individual’s estate at the time the plan is taken out.

What are the biggest risks associated with pre-paid probate plans?

At first glance, pre-paid probate plans may seem like a practical way to ease the future burden on loved ones. However, these plans often come with hidden dangers that could cause more harm than good.

Firstly, there are no stringent qualifications required for selling pre-paid probate plans. Quite often, the plans are sold without delving deeply enough into the assets and estate of the individual taking out the plan. Estates can change significantly over time. What may start as a modest estate could grow or become complicated due to unforeseen circumstances. A company offering a fixed-fee probate service decades in advance may not be equipped to handle these changes, leading to potential shortfalls or delays.

There is also a lack of transparency of how the funds paid up front are going to be held. Some firms are guaranteeing that funds will be ringfenced or held in a client specific account or trust until they are needed, but there is very little proof of this.

The collapse of Safe Hands, a company that sold pre-paid funeral plans, serves as a cautionary tale. Many customers lost their money without receiving refunds when the company went into administration. This highlights the potential vulnerability of funds invested in pre-paid probate plans.

All of the above is made more worrying by the fact that the target for a lot of these plans are vulnerable and elderly people. Marketed in the right way, pre-paid probate can seem like the perfect solution for somebody wanting to ease the burden on their family after they pass away, with the risks downplayed or not disclosed at all.

What has been the response from industry professionals and organisations regarding pre-paid probate plans?

Many industry professionals are arguing for regulations to be put in place for the selling of pre-paid probate. Big names in the industry such as STEP and The Legal Services Board have all shared their thoughts condemning pre-paid probate.

Most recently, in June 2023, the Competitions & Marketing Authority (CMA) launched an investigation into will writing and other legal services. During that investigation, they have highlighted pre-paid probate as an area of concern.

Has there been any regulation introduced for similar services?

With all of the potential pitfalls and potential for things to go badly wrong, it’s hard to believe that this service is not yet regulated. This also means that if something does go wrong for anybody who has taken out a plan, there is no security or fall-back option for them.

The Financial Conduct Authority (FCA) now regulates pre-paid funeral plans in order to increase standards and increase consumer protection. As of July 2022, the FCA authorises reliable companies in the selling of this service, meaning that any companies who do not comply with their regulations are not authorised to sell them. Some of the regulations introduced include looking after client’s money, bans on cold calling and introduction of a register of approved firms. Many of the reasons for this being input ring-true with the risks posed by taking out a pre-paid probate plan.

Customers of failed pre-paid funeral plans now have a safety-net, but that luxury is not yet being afforded to pre-paid probate customers. However, at the Best Foundation, we are committed to representing reliable and qualified professionals who are covered by the Best Foundation Client Guarantee and to giving consumers a space to find them and chose an estate planning professional who is right for them.

About the author

Philip Pamment is Chair of the Advisory Board of BEST Foundation, a non-profit organisation and professional membership body for modern, forward thinking Estate Planning professionals and firms.

See also

Place a deceased estates notice

The duties of an executor: what to do when someone dies

Images

Getty Images

Publication date

9 September 2024

Any opinion expressed in this article is that of the author and the author alone, and does not necessarily represent that of The Gazette.