Exploring the Risks of Releasing Funds Without Probate: A Closer Look at Financial Affairs After Death
In recent years, there has been a concerning trend in England and Wales regarding the release of funds from bank accounts of deceased individuals without requiring proof of probate. This practice has seen a significant increase in thresholds under which banks will release funds, with some institutions now issuing as much as £125,000 without probate.
This trend has raised alarm bells among probate practitioners and legal experts, as it not only results in lost income for professionals but also poses risks to beneficiaries and the Department of Work and Pensions (DWP). The DWP has the right to recover debts owed to them from the estate of a deceased person, but when funds are released without probate, they may never become aware of the estate and miss out on much-needed repayments.
Furthermore, the lack of transparency and oversight in this process can facilitate fraud and potentially allow individuals to avoid paying inheritance tax. The practice also raises concerns about the proper administration of estates and the potential for distressing debt recovery and legal action for beneficiaries in the future.
To address these issues, there have been calls for financial institutions to adhere to a lower, specific, standard limit for releasing funds without probate, with the recommended threshold being the £5,000 limit for Small Estates as stated in the Administration of Estates (Small Payments) Act 1965. Government guidance or legislation to improve consistency in this area has also been suggested to prevent complications in estate administration.
Overall, the importance of transparency, accountability, and due process in managing matters related to death and finances cannot be understated. It is crucial to ensure that estates are properly administered through the probate court system to avoid potential risks and complications for beneficiaries, the DWP, and the public purse.