Head to head: accountants doing probate
By Lloyd Junor
As the one-year anniversary of the first accountancy firm being granted a probate license approaches, accountant Barry Jefferd and solicitor Lloyd Junor debate the effects of the change
Barry Jefferd, accountant, George Hay
In November 2014, George Hay became one of the first firms in the country to be authorised by the Institute of Chartered Accountants in England and Wales (ICAEW) to offer non-contentious probate services.
I was delighted by this new opportunity. For many years our team at George Hay had either acted as executors where clients had appointed them, or assisted our clients with estate administration. However we always had the gap of not being allowed to apply for probate itself, so we used to do the work and then pass to a solicitor to submit.
We believe that probate and estate administration are a natural fit for a firm of accountants.
Cradle to the grave
For example, should one of our clients pass away, we are already familiar with their financial affairs; we would have prepared their tax returns for many years and would fully understand the financial implications of the various strands of the estate.
We would also be aware of the history of estate assets and any 'family politics' that might be in the background - there is nothing like a death for bringing long standing grievances to life (albeit if it became contentious we would not act). If our clients own a business, we have in-house business valuation specialists that can provide a value for probate and/or a possible sale. We can also offer practical advice to the executors now running the business.
Our first year has not just seen us act for clients; we have acted for client's relatives, business contacts, will writers and families with no previous connection to the firm. We have even acted for a solicitor who found numbers difficult, and was happy to use us.
Nothing new - business as usual
The whole probate process fits neatly with our traditional expertise. We complete numerous forms for HM Revenue & Customs on a variety of issues - so why not the inheritance tax forms as well?
We carry out our duties in accordance with the various probate regulations, but these are no different to the tax and accounting regulations that we are already used to; they are simply another rule book that needs to
be followed.
At the end of the assignment we are of course well placed and experienced to complete the estate accounts. In fact we set up our spreadsheets such that estate accounts are available at every stage throughout the process, meaning it does not become an add-on at the end.
An unmatched offering
One of our biggest advantages is that we cover the complete range of taxes, whereas many firms of solicitors only advise on inheritance tax. When we are talking to executors or beneficiaries, we can advise on areas such as income tax and capital gains tax, which may well lead to a different action by the personal representatives.
It is important that using an accountant to carry out probate work is not regarded as a second best option. The work can only be carried out by those accountants who have passed an exam and have been authorised by the ICAEW to do so. We are heavily regulated and operate within strict controls to maintain a service that the personal representatives can feel safe
in using.
We believe that as the general public becomes more aware of the choice available to them, accountants will play an increasing prominent role in estate administration. When I first started in the profession, clients used to get their solicitor to form companies; now they use us. Straight forward probate is simply HMRC form filling and crunching numbers - I can see that this service will soon change sides as well.
Summary
The benefit of entry into this market also comes with its burdens and accountants will have to negotiate how they deal with the risks associated with such work. Given the above, there remain compelling reasons why solicitors should remain at the forefront in this field.
Lloyd Junor, solicitor, Adams and Remers
The advent of licensed chartered accountants undertaking probate services - previously the sole preserve of solicitors - poses a great threat to private client practitioners.
The logic of allowing accountants to do such work is irrefutable. As the LSB noted, many accountants already offer trust planning and estate administration services, and their newly acquired ability to act as a single adviser incorporating probate services is a natural complement to existing work. Advising across all three services will reduce costs to consumers and increase competition, in accordance with the intention in the Legal Services Act 2007.
Accountants also have an eye on will writing. Such activity is at risk of competition from accountants because it is not regulated and fits naturally with the provision of probate services. Small and mid-sized high street accountancy practices will not only be selling their new found probate services to their existing client base, but will also seek new clients, vying to take this work away from solicitors.
Why then should consumers choose solicitors above accountants for their will, estate administration and probate services?
Cost
It has been said that a major differential for consumers between both professions will be cost, with accountants, who have a more process driven working practice, able to offer a reduced level cost for probate and estate administration than solicitors.
It is of course too early to confirm whether this will be the case, or the degree to which there will be any significant price differential. However many solicitors practices are heavily invested in case management software, having managed their probate/estate administration teams to maximise productivity and performance. Assuming salary and overhead costs are similar, it is doubtful that cost will be a major issue.
Confidentiality
Although accountants are bound by confidentiality, solicitors have the advantage of legal advice privilege; this gives significant protection to clients from any requirement to disclose privileged materials for their direct advice. Such privilege from disclosure may be of substantial benefit to certain clients, which is only available if they have been advised by a solicitor.
Skill and experience
The level of accumulated skill and experience that many private client practitioners have, which is after all the reason why most clients choose a solicitor, is a major point of difference.
Running probate, estate administration and drafting wills can be complex. To become individually authorised, accountants merely have to undertake a three and a half day course. The ICAEW say that their existing training, combined with the ‘relatively straightforward’ nature of non-contentious probate work, means it does not need to require ‘detailed study of the laws governing wills, probate and estate administration’.
No amount of training can compensate for skill and experience acquired in the field, and the risk to consumers of poorly skilled and experienced practitioners is obvious.
Protection for consumers
Tying in with the above it is certainly welcome to see that accountants will be subject to the Legal Ombudsman’s regime, so any service or costs complaints will fall within his remit.
However, as indicated above, the potential for negligence by accountants is higher. In this regard the level of PII cover that accountants must hold poses a potential risk to clients. Under the ICAEW PII regulations, a minimum indemnity limit of £500,000 will be needed by those providing probate services.
However this still falls far short of the minimum requirement of £2-3m for solicitors. In addition, under the ICAEW PII regulations, the minimum period of run off cover for accountants remains two years (against six for solicitors). Given the propensity for claims in connection with legal work, more cover and run-off is recommended, without which clients may be out of pocket.