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Earlier this year, the Financial Conduct Authority (FCA) issued a consumer warning about pre-paid probate plans. The FCA’s warning comes as an ever-growing number of unqualified and unregulated ‘will writers’ and others seek to take advantage of people’s financial worries.
Increased marketing by these individuals and organisations includes cold calling and high-pressure sales tactics. Notably, these unregulated products are often sold alongside pre-paid funeral plans. But the FCA’s warning is stark – “there are no regulatory protections in place for you”.
What is pre-paid probate plan?
Probate is the legal right to deal with someone’s estate – i.e., money, property, and possessions – after death. Administering an estate includes paying any Inheritance Tax and debts before distributing the estate’s assets according to the terms of the Will.
Many people, particularly older people, naturally look to reduce the stress on loved ones after they have passed away. And that’s where a pre-paid probate plan can appear attractive, seemingly covering the legal costs of estate administration.
But probate is not always required. And even when it is, plans are typically based on the value of your estate at the time of purchase, failing to consider the possibility of changes or complexities.
And although there’s a commission ban for pre-paid funeral plans, the same does not apply to pre-paid probate plans. Therefore, many plans include commission payments, significantly increasing their cost.
Unregulated
As unregulated products, it also means there’s little chance of getting your money back should the organisation fail. That’s because, unlike solicitors and other professionals, they are not bound by rules requiring your money to be held in trust or backed by insurance.
And the FCA warns that “even where plan operators choose to use a trust to manage assets, those trusts could still invest in unsuitable investments, putting your future benefits at risk. We saw cases where this happened with funeral plan trusts before our regulation began.”
Your only recourse might be to report them to trading standards. But that is a somewhat blunt instrument once an organisation is in liquidation and your money has, essentially, evaporated.
No freedom of choice
Pre-paid probate plans also require your chosen executor to use a specific nominated person or organisation to obtain probate and administer your estate. In other words, your executor has no freedom of choice to instruct competent solicitors.