Are unregulated pre-paid probate plans the new Wild West?

For years Money Mail fought for pre-paid funeral plans to be regulated to protect vulnerable customers from rip-off sales practices.

There was evidence of mis-selling, unfair charges and concerns around the financial soundness of some providers.

But as the industry at last faces a clampdown this summer, experts now warn that greedy salesmen have already shifted their attention to the next big thing: pre-paid probate plans.

Miss-selling threat: In the wake of the clampdown on funeral plans, experts warn that greedy salesmen have already shifted their attention to the next big thing: pre-paid probate plans

Probate is legal authority needed to manage someone’s estate when they die. In Scotland this is known as a grant of confirmation.

Not everyone will need this document.

Some banks will release up to £50,000 without it, and any assets held jointly by married couples pass automatically to the surviving spouse. 

If you require probate and apply for it yourself, there is a fixed £273 fee for estates of more than £5,000. In Scotland, confirmation is free for estates under £36,000 and fees vary above this.

If you use a solicitor, the cost will depend on the firm, with bills sometimes charged as a percentage of the value of the estate. 

Ordinarily, you pay what is owed after someone has died. But a new breed of probate plan providers claim families could benefit from peace of mind by paying upfront.

As with funeral plans, the idea is that by doing this you will be protected from rising costs in the future. Firms also claim to reduce the administrative burden on loved ones by handling most of the paperwork.

Yet experts warn that probate plans could well prove to be a waste of money and risk leaving families in limbo. Any delays in the process can mean bereaved relatives are unable to access funds to settle bills or sell property.

Customers will also have no protection if something goes wrong because the market is unregulated by the Financial Conduct Authority (FCA). 

This means they could lose thousands of pounds if companies cease trading and do not have enough money to refund people. Some organisations offering probate plans are also unclear on their websites about what extra fees and charges customers could face.

Solicitor Anna O’Mara, from law firm Sills & Betteridge, says: ‘You do not know if probate is necessary until the person dies, so you could be paying upfront for a service you do not need. 

With people living longer, many need to sell their homes and use their money to pay for care fees, diminishing their assets. Probate is not needed in a third of cases I see.

‘These plans are just exploiting older people who want to save their families any extra stress when they are gone.’

£2,000 for stress and confusion 

Family values: Margaret Gibbs¿s wedding to her late husband, Alan

Family values: Margaret Gibbs’s wedding to her late husband, Alan

It has been a year since Margaret Gibbs died aged 77, but her family are still battling to get probate.

Margaret had purchased a £2,300 pre-paid plan with Philips Trust Corporation [PTC] in 2018. 

Her three sons, set to inherit her three-bedroom house and around £40,000, discovered the plan after her death.

Margaret also used the same company to draw up her will.

Staff informed youngest son David, 47, from Brigg, Lincolnshire, that their Lichfield office had closed and that they did not have a copy of her will.

He was told to contact Deedbank, which said it did not have it either. He was pointed to other firms which could not help and Philips Trust Corporation then stopped responding to them.

The firm was also appointed as executor of Margaret’s will and until it steps down no one can take control of the estate.

David says: ‘They took more than £2,000 and promised a seamless service that was never delivered.’

PTC did not wish to comment.

Simon Cox, of consultancy Funeral Solution Expert, adds: ‘Pre-paid probate plans are not a regulated product. It really is the new Wild West. Any company with a call centre could start selling them. It is alarm bell time.’

One firm, Probate Specialist, set up in 2020, claims on its website that ‘planning your future has so many benefits and no disadvantages’. It then lists examples of how much its plans cost.

A 55-year-old with a ‘small’ £325,000 estate would pay £3,465, while policyholders aged 70 with ‘large’ estates of £750,000 would pay £5,530, its website says.

The firm then compares this to ‘an average solicitor fee of 2 per cent of the total estate’, which it claims would be £7,800 and £22,500 respectively.

If the value of the estate rises before the customer dies, it says there will be no extra cost.

But there is a long list of services that are not included — such as the ‘probate registry fee’.

This means families would still have to pay the £273 fee to apply for probate after their loved one’s death. The website also states customers who cancel after 14 days will receive a refund ‘minus the management fee’.

It did not say how much this would be on the website but when we asked via its live chat we were told it could be as much as 30 per cent of the cost of the plan.

Another pre-paid probate plan provider, Philips Trust Corporation, launched in 2017 and based in Salford, Greater Manchester, quotes £2,100 for a 70-year-old with a £350,000 estate. It compares this to a ‘typical low-cost solicitors’ probate charge’ of 1.5 per cent fee plus VAT, which would be £6,300.

On its website it promises to ‘provide you and your loved ones much-needed peace of mind’.

Yet more than 90 per cent of customer reviews about the firm on Trustpilot are bad or poor.

Some firms, such as Probate Protect, state that customer money is ringfenced in an independent trust until it is needed. The funds are then released upon death to pay one of its approved partner solicitors to handle probate.

But because the industry is unregulated, there is no oversight of how these funds are run. Other firms do not include any information on their websites about where customer money is held but may provide this later in the sales process.

If you require probate and apply for it yourself, there is a £273 fee for estates of more than £5,000. In Scotland, confirmation is free for estates under £36,000 and fees vary above this

If you require probate and apply for it yourself, there is a £273 fee for estates of more than £5,000. In Scotland, confirmation is free for estates under £36,000 and fees vary above this

Money Mail has also discovered that some funeral plan providers are now branching out to sell probate plans. From July 29, all companies selling funeral plans must be regulated by the City watchdog or cease trading.

But there is no such requirement when offering probate plans.

One funeral plan provider Capital Life sent an email to businesses selling its products in February which said: ‘The average cost of probate is between 2 per cent and 5 per cent of the value of the estate, which can equate to £15,000 on an estate worth £300,000.

‘The equivalent pre-paid probate plan costs just £3,495, saving the beneficiaries thousands. It really is a must for anyone planning for the future.

‘Having professionals look after the entire administration of the estate at the time of need gives much needed comfort to families that their wishes will be adhered to as quickly, efficiently, and cost-effectively as possible.’ 

The firm said it was looking for professional estate planners and accountants to offer its probate plans and that it offered ‘excellent remuneration packages’.

Disgraced funeral plan firm Safe Hands was also looking to move into the pre-paid probate market before its collapse in March.

Around 47,000 worried customers are currently waiting to find out if they have lost their money or if their plans will be honoured.

On Companies House, a firm called Safe Hands Probate Plans was registered in March 2019.

Safe Hands’ former chief executive, Thomas Gormanly, was named as a director — but has since stepped down.

But Mr Gormanly has been an active director of another firm called Prepaid Probate Plans since February.

He is also a former director of the Family Trust Corporation and The Will Writing Company, which were incorporated by the Philips Trust Corporation in 2018.

Claire Davies, director of Solicitors for the Elderly, says probate plans may not take into account the complexity of a person’s estate.

She likens them to cheap wills that seem like a good idea at the time but can be overly simplistic and may end up costing more if issues arise and cause havoc for families at a time when they are at their most distressed and vulnerable.

Ms Davies adds: ‘People need to understand the risks of taking unregulated advice from companies simply looking at their profit margins.

‘It’s important to find a properly qualified professional to support you during a stressful and upsetting time. You wouldn’t go to a heart surgeon for a broken leg or a hairdresser for a wedding dress.’

Emily Deane, from member body STEP, which sets and upholds standards in estate planning, says: ‘The best way to ensure that probate costs are kept to the minimum is to appoint trusted executors, lay or professional, when making your will.

‘This will provide you with the peace of mind that those nominated will retain some control over the probate process and the assurance that they will keep the costs and best interests of your loved ones in mind.’

Clive Darlaston, from Capital Life, says he believes all their products offer significant savings and value for customers.

He adds: ‘It has always been the strategy of Capital Life to move into this space as Capital Life Law, who are a fully regulated law firm, and we will look to administer the probate plans using our in-house solicitors. 

Capital Life follow a strict code of conduct and customers are fully protected through professional indemnity insurance.’

An FCA spokesman says: ‘The Government has changed the law for us to take over regulation of pre-paid funeral plan providers on July 29 [of this year]. Pre-paid probate plans do not fall under our extended remit which is set by HM Treasury.’

The Treasury declined to comment on whether it would be taking action.