Archive | June, 2013

Probate Fees and Executors – Know Your Rights and What To Expect !

7 Jun

I feel there is a need to write this article as I have recently been involved in an estate, where the fees charged are wholly not reflective of the work carried out by, in this case, a local solicitor – we will call the “professional” in question Warrell Card to give the person a name. (This is not their name and in actual fact, the in question which has inspired this article is actually female. So, any similarity to any known person alive, dead and some alternative is simply coincidence and nothing more.)

Please do not be afraid or concerned getting legal advice, if selected as executor, and in most cases the work done and the fees charged are fine. I have had dealings with many solicitors over many years where their involvement was appreciated. As with all of these situations, in most cases the solicitors provide an excellent service for a fair price but as always there are a few exceptions.

Also, to all those who think it may be  better to seek the services of a Will Writer, in my opinion, don’t. I personally believe that the role of Will Writing should be carried out by a suitably qualified solicitor. My experience has been poor where Will Writers have been involved.

As for applying for Probate – worse so – yes, you can do this yourself but depending on your wish to complete the process personally or delegate the responsibility, your financial aptitude and the complexity of the estate….

Just take care and remember, you are the executor so you are “in control” – you are employing others to complete a job – so take care and make sure you are happy with the work and price for what is being done and has been done. If you were re-turfing your lawn you would ask how much and what is being done. This is the same – you are paying for a job to be done – start to finish.

Probate Solicitors Fees

Probate is the process of obtaining the official approval of a last will and testament. What is Probate? This is the process of administration of your Will when you die. It’s a detailed process and solicitors charges can be substantial.

You can avoid the probate fees that solicitors charge by gaining probate yourself. However many people find bereavement a stressful time, and some would rather not learn the intricacies of administering the estate when they are feeling the loss of someone close to them. Most choose to employ a probate solicitor or other professional. Please make sure that you use a solicitor specialising in Probate, otherwise you run the additional risk of higher fees through inexperience of the “professional” and the point that all activity and time will be fee charging.

A solicitor may be named in the will as an executor – in which case, they will generally administer the estate and the cost of probate will be charged according to their scale at the time.

The executor’s job is to gather in all your assets, and after paying off any debts, they obtain a ‘Grant of Probate’ on your estate. Finally they pay out the money from the estate according to the Will’s instructions.

What are the average probate fees?

Banks charge consistently higher fees than solicitors fees – and, in turn these are often undercut by will-writers. To confuse matters, some charge a percentage of an estate’s value, others charge for work done by the item or hour, and many charge for both.

Bank’s fees for probate can generally work out at between 4% and 5%, so in my opinion are generally not good value.

Solicitor’s Probate and Associated Administration fees are usually based on guidance from the Law Society which sets an initial fee of up to 0.75% of the value of the property, plus up to 1.5% of the value of other assets, and other charges on top of that. After totalling up all the costs, a large estate may work out closer to 0.75% to 1.00% – that’s say up to £10,000 on an estate of £1 million, while smaller estates could amount to a larger proportion. Average fees for probate and estate administration work hover around £2,500. But even for smaller estates, the probate fees don’t often to go below £2,000.

While these figures provide a guide, it is important to ask around and get prices. Lawyers can charge from £100 per hour to £250 per hour or more for probate work, depending on the seniority of the person on your case. If a simple estate took 10 hours it would be much cheaper than a more complex will taking 20 hours’ work – and a solicitor would have to quote depending on your circumstances. What’s more, solicitors’ probate fees in London can be prohibitively high. It’s certainly worth shopping round and checking out specialist firms or at least ensure you only deal with the specialist within the selected Law Firm.

The big variables in the level of fees are when a Will gives rise to a particular issue or where there is a mistake or an omission. The Will might be contested by disgruntled family members who feel they have a right to a share in the estate.

Sometimes beneficiaries cannot be traced – or assets cannot be found. If there is no will to be found, the deceased is regarded as dying ‘intestate’, and the Govenment’s rules on intestacy come into play. This too, can increase the costs.

How do you save on a probate solicitor’s fees?

First, get a fixed quote after your first meeting. Prepare well for any face to face meetings and have as much information and details to hand. Remember that letters take time, so ensure that correspondence is kept only to that which is essential. If you want, you can do some of the work yourself rather than leaving everything to the solicitor.

Lastly, if you are having your Will drawn up, there is no need to pre-pay for probate services at that point. Some will-making companies have been criticised for charging large sums in advance for services that may not turn out to be as useful as their advertising claims.

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Gold – the ultimate hedge, or an increasingly irrelevant asset?

4 Jun

Whether or not you are a gold bug, as followers of the yellow metal are sometimes known, the reality is that gold remains a popular investment asset. More than any other precious metal, gold is where investors turn at times of economic, political and social unrest or as a hedge against currency crises and stock market weakness. Just recently the returns have been less than golden, but opinion is as divided as ever over what the future may hold in store. 

However, the swift reversal in the fortunes of gold – down from a high of over $1900 in 2011 to just above $1,300 this year – has led to technical analysts calling a new bear market. Yet conditions around the world – conflict in Syria, problems with North Korea, continuing concern over economic strength and low-interest rates – set a scene that many would consider conducive to continuing demand.

The recent collapse in the gold price owes much to the increasing level of speculation that surrounds this asset, an approach made easier through the introduction of sophisticated instruments allowing exposure and the use of futures contracts and derivatives. The severe fall in April – the largest for 30 years – was put down to margin calls brought about by recent weakness in the price, thus triggering a further wave of selling. Hedge funds, which are often active in this market, bore the brunt of the blame, though there was some speculation that Cyprus might have to sell some of its reserves as part of the restructuring demanded by the providers of the bail-out fund, perhaps setting the scene for other indebted nations to sell.

However, it is hard to view such concerns as being the reason behind gold’s fall from grace. Cyprus’s stock of the metal is small in international terms, while some governments, such as Sri Lanka, have even indicated that they could take advantage of the decline to add to their reserves. Perhaps a more credible explanation is that the price was driven higher through the availability of cheap money from central banks – itself a response to the financial crisis which gripped the developed world which was just the kind of background that has investors flocking to buy gold as a hedge against uncertainty – and that this will come to an end at some stage.

 

What is the reason for holding gold as an investment?

Make no mistake, gold is currency in its purest form. Until comparatively recently many currencies were convertible into gold – the so-called “Gold Standard”. Globalisation and competitive exchange rates have rendered this particular aspect of gold as an investment largely irrelevant, but it is worth remembering that convertibility into gold was only abandoned by America in 1971.

Perhaps one of the principal reasons for considering gold as a potentially important investment is the limited quantity of it around. It is estimated that all the gold ever mined totals only around 160,000 tonnes – a quantity which veteran investor Warren Buffett once remarked could be held in a cube with sides measuring just 20 metres. The reality, though, is no-one knows for certain how much gold is around, though its durability and the fact that central banks hold a lot of it suggests that most of the gold ever mined is still around in one form or another.

 

Because supply is relatively inflexible (which itself creates a reason for wishing to hold it), price fluctuations are most likely to occur through changes in sentiment. Two macro aspects will influence the price on a regular basis, though. Because gold does not pay dividends and actually costs money to store, interest rates can affect demand, with high interest rates likely to depress the price and low to encourage investing. Recent low-interest rates will certainly have helped the price, with fears that at some stage quantitative easing must come to an end a reason to turn a seller.

 

Similarly, the value of the dollar influences sentiment. Gold is priced in dollars – as is oil, which arguably enjoys some correlation with the gold price – so a weak dollar encourages a rising gold price, just as the recent reversal of the fortunes of the greenback could well have added to the selling pressure. However, gold’s position as a global currency means that some holders will always wish to retain a physical holding in case local upsets render their other assets of limited or unrealizable value. Gold is the ultimate hedge against fear.

 

How might investors gain exposure to gold?

The options available today are far wider – and arguably purer – than those which investors could utilise in the past. Back in 1974, when a global economic and financial crisis on a scale not too far removed from that which gripped the developed world recently brought our stock market to its knees, renowned investor Jim Slater remarked the ideal investment portfolio was shotgun cartridges, tins of baked beans and Krugerrands. This South African minted gold coin closely followed the gold price in value and was much in demand by investors during these difficult times

Gold coins remain an option today, as do bullion bars for the seriously wealthy, but Exchange Traded Funds are now arguably the easiest option for an investor seeking exposure. The first of these to be issued – SPDR Gold – is one of the largest ETFs available, worth around $50 billion. It is also possible to purchase gold certificates, which demonstrate ownership without the costs associated with storage, while derivatives, including CFDs, also provide an option. Gold can easily be included in a portfolio if so required.

 

What about gold mining shares?

One of the less easy to understand aspects of gold investment is that gold shares often do not move in line with the price of the metal. Mining shares, for example, peaked ahead of the gold price and have suffered a torrid time of late. The best known fund, BlackRock Gold & General, includes the term “General” in its title at the insistence of the first manager, Julian Baring. He contended that, while opportunities to profit from gold shares would arise, at times they should be avoided en bloc – hence the ability to purchase other mining assets.

Just recently there has been evidence that the surge in the price encouraged some mining companies to develop higher cost options, which the recent fall in the gold price has rendered uneconomic. Comparing valuations of gold mining shares with those of companies extracting other minerals suggests that this sector of the market’s problems may not yet be over. However, the most important point to make is that mining shares do not automatically confer performance of the gold price to the investor and need to be considered totally separately.

 

Is the future direction of the gold price any easier to forecast than for any other asset?

This is an easy question to answer on the face of it, though what is happening elsewhere in the investment world can give an important steer to how the price might behave. The performance of gold, like any other asset, cannot be forecast with any degree of accuracy. Gold remains an option for those seeking a hedge against the uncertainties that can develop both financially and geopolitically, but is hardly an appropriate investment for anyone seeking income.

That said, there will always be gold followers and gold traders. Watch interest rates and the dollar if gold is an area you seek to follow, but do not expect any silver bullet when it comes to knowing when to buy and when to sell.

Remember, diversification should always be the wise investor’s mantra. So be a gold follower or not, remember not to rely any specific asset class, single strategy or geographic region too heavily – otherwise you risk a higher potential to losses. You could also argue, a higher potential to profits – true but I believe the art of investing is to minimise market losses and enjoy fair potential to market gains. All I would say, is this is a more defensive strategy and has been a successful approach over the last decade or two (showing my age now).

 

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