County Court Judgments (CCJs) hit record high!

Published: 16th May 2019

A total of 321,044 judgements were made against consumers in Q1 2019, a rise of 5% compared with Q1 2018.

The total number of adverse CCJs’ has risen year-on-year for the past six years.

The average value of a consumer CCJ recorded over the quarter decreased by 6% to £1,398 compared to Q1 2018.

The continued rise in the number of CCJs is a worrying trend and shows the financial challenges many people are facing.

Over-55s face rising levels of unsecured debt

Unsecured debt amongst 55 to 74 year olds has risen by 34% over the last four years, more than twice the national average. The growing amount of unsecured debt amongst older age groups is worrisome, as it places a more significant burden on the borrower’s life savings or pension as they head into retirement.

The most common form of debt incurred by over-55s was credit cards fees, with over 30% spending more than they paid off each month. Nearly one in five also took out loans to pay for home refurbishments, and the same number used credit to repay other outstanding debts.

Debt consolidation in retirement is difficult, it is not always possible or sensible to use savings to pay off any outstanding balances. Debtors may have planned for that money to be their children’s inheritance, but unfortunately liabilities are payable by the estate before any residual balances are payable to beneficiaries.

Whats the impact for Executors?

The responsibility for administering the estate of a deceased person rests with the executor. An essential duty imposed on the executor is to ensure that all liabilities of the deceased estate are paid.

The first thing the executor should therefore do, before paying any debts, is ascertain the solvency of the estate. If there is any risk that liabilities will outweigh assets, no immediate payments should be made to any creditors. 

In some cases the fact finding process is not always straightforward, there may be unknown and/or untraceable creditors.

The Credit and Liabilities Search is the first service of its kind to process data from Experian into a single report, to assist with Estate Administration (Bereavement) cases. The Credit and Liabilities Report helps professionals to ensure that they;

  • perform a comprehensive check for any traditional or online potential creditors

  • identify relationships with financial organisations in order to locate additional accounts and holdings

  • identify an estate with County Court Judgements (CCJs), bankruptcies or potential insolvency to remain compliant with insolvency law

  • indemnify themselves and beneficiaries in case of unknown or unidentified creditors arising after distribution

  • gain a rapid insight into the persons financial affairs within 48 hours, minimising delays in managing accounts and enabling rapid feedback to the client.


What is a County Court Judgment (CCJ)?

county court judgment (CCJ) is a court order to repay money you owe to a creditor. You may receive a CCJ if someone issued a claim against you and you didn't respond. The CCJ will include details of the amount owed, who you owe, how to pay, and the deadline to pay.

When a debtor has a CCJ against them, they have 14 days to respond and then 1 month to pay the amount they owe in order to avoid the CCJ from affecting their credit file. If they can afford to pay the full amount they owe straight away, they may have the CCJ removed from their credit file.

If the debtor pays off the CCJ more 1 month after the judgment, they can’t remove it from the register, so it’ll appear there for six years. During this time, if the debtor does pay it off in full, they can apply to the court for a ‘certificate of satisfaction’. This won’t remove the CCJ from the public register but it’ll show anyone who checks the register that it’s been paid off or ‘satisfied’.

A CCJ remains on the debtor’s file for six years starting from the date of the judgement, even if they manage to pay it off at some point. If the person tries to take out further credit, every lender will be able to see the CCJ. However, the CCJ expires after six years, and it will be removed from a credit file and the public registry, even if it was not paid off.

What happens if you don’t keep to the terms of a CCJ

If a debtor receives a CCJ and doesn’t keep to the terms it sets out, the creditor can ask the court to enforce the debt.

There are several ways that they can do this:

  • bailiff action

  • Charging Order

  • Attachment of Earnings Order.

The impact of Hope Value of Property on Inheritance Tax Act 1984

Published: 28th March 2019

As the executor or personal representative for an Estate, there is always the challenge of valuing the assets as part of the Estate Administration process. It is easy to think that where an Estate has property as assets, it is okay to rely on an Estate Agents valuation, but that is not in the best interest of the Estate or compliant with the Section 160 of the Inheritance Tax Act 1984 (IHTA).

To protect the beneficiaries of the estate and your own professional indemnity insurance as an Executor, it’s important to find experienced surveyors who are able to provide valuation advice for Capital Gains Tax purposes and to negotiate with the Valuation Office Agency in respect of Capital Gains and Inheritance Tax issues.

Recent cases have shown that HM Revenue & Customs (HMRC) are proactive at ensuring the IHTA is complied with and that the appropriate tax is paid on an Estate.

In the Land Chambers case, Palliser v HMRC [2018] UKUT 0071 (LC) the Upper Tribunal found that a maisonette, in need of modernisation but with great potential, should have been valued for IHT purposes with hope value of £184,000 included. A reminder that any valuation used must be able to stand up to scrutiny by the District Valuer.

Section 160 of the Inheritance Tax Act 1984 - Market value

Except as otherwise provided by this Act, the value at any time of any property shall for the purposes of this Act be the price which the property might reasonably be expected to fetch if sold in the open market at that time; but that price shall not be assumed to be reduced on the ground that the whole property is to be placed on the market at one and the same time.

In this case a Notice of Determination was served by HMRC under section 221 of the Inheritance Tax Act which resulted in the beneficiary receiving an asset of a higher value, resulting in the Estate owing more inheritance tax.

DETERMINATION FROM Palliser v HMRC [2018] UKUT 0071 (LC)

A statutory valuation, made in accordance with section 160 of the 1984 Inheritance Tax Act (160 IHTA),  requires the determination of the price which the Property might reasonably be expected to fetch if sold in the open market.

As the property was being marketed with the potential for improvement, then if the market is prepared to pay a price which includes the prospect of an enlarged floor space, that must be taken into account in the valuation.

To the extent that the potential has not been crystallised by a planning permission, its value will be hope value rather than development value, but either way it is not an element of value that falls to be ignored under section 160 IHTA.

CASE KEY POINTS

  • 19 June 2012 (Date of Death Valuation) Beneficiary inherited an 88.4% share in a property

  • 12B Wedderburn Road, London, NW3 5QG (The Property) was a dated and unmodernised maisonette, requiring major refurbishment

  • August 2012. The date of valuation, a RICS Chartered Surveyor valued the asset at £1.4m

  • Beneficiary entitlement £1.237m

  • RICS red book did not mention Hope Value so it was not included. However the Valuation did list issues which negatively impacted the value

  • July 2013. The Property was marketed by Knight Frank

  • The beneficiary pushed the agents

    • for the highest possible asking price & to market the property at £2.75m

    • to promote the largest living space possible in the marketing materials

  • March 2014. The property was sold for £2.525m

  • 13 December 2016. HMRC issued a Notice of Determination under section 221 of the Inheritance Tax Act 1984 under which the deceased’s freehold interest was valued at £1,829,880

  • 31 March 2017. The Valuation was upheld after a review by HMRC

  • 28 April 2017. The beneficiary appealed the decision to the First-tier Tribunal proposing a correct valuation of £1,113,840

  • 26 May 2017. The appeal was referred to the Upper Tribunal (UT) to determine the valuation dispute

  • The Upper tribunal dismissed the appeal and criticising the surveyors negative approach to the valuation

The following case is referred to in this decision:

Inland Revenue Commissioners v Gray [1994] STC 360 - The court considered the ‘statutory hypothetical sale’ when valuing property for Inheritance Tax purposes: ‘The property must be assumed to have been capable of sale in the open market, even if in fact it was inherently unassignable or held subject to restrictions on sale.

OTHER CASES

Inland Revenue Commissioners v Crossman HL ([1937] AC 26) - For a valuation for estate taxes, the value is what a purchaser in the open market would have paid to enjoy whatever rights attached to the property at the relevant date.

Duke of Buccleuch v Inland Revenue CommissionersHL ([1967] 1 AC 506) - When a valuation was to be attributed to a property the test must be applied to the property as it actually existed and not to some other property, even if in real life a vendor would have been likely to make some changes or improvements before putting it on the market.


SECTION 221 OF THE INHERITANCE TAX ACT

NOTICES OF DETERMINATION

(1) Where it appears to the Board that a transfer of value has been made or where a claim under this Act is made to the Board in connection with a transfer of value, the Board may give notice in writing to any person who appears to the Board to be the transferor or the claimant or to be liable for any of the tax chargeable on the value transferred, stating that they have determined the matters specified in the notice.

(2) The matters that may be specified in a notice under this section in relation to any transfer of value are all or any of the following—

(a)the date of the transfer;

(b)the value transferred and the value of any property to which the value transferred is wholly or partly attributable;

(c)the transferor;

(d)the tax chargeable (if any) and the persons who are liable for the whole or part of it;

(e)the amount of any payment made in excess of the tax for which a person is liable and the date from which and the rate at which tax or any repayment of tax overpaid carries interest; and

(f)any other matter that appears to the Board to be relevant for the purposes of this Act.

(3) A determination for the purposes of a notice under this section of any fact relating to a transfer of value—

(a)shall, if that fact has been stated in an account or return under this Part of this Act and the Board are satisfied that the account or return is correct, be made by the Board in accordance with that account or return, but

(b)may, in any other case, be made by the Board to the best of their judgment.

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Santander did not transfer funds totalling over £183m to beneficiaries

Published - 8th March 2019

The Financial Conduct Authority (FCA) has fined Santander £32.8m (Discounted from £46m) for “serious failings” to effectively process the accounts and investments of deceased customers.

The numbers of estates affected is staggering 40,428 customers totalling £183m of funds that were not transferred when it should have been.  Santander also failed to disclose information relating to the issues with the probate and bereavement process to the FCA after it became aware of them.

Santander breached FCA principles for businesses Principle 3 and Principle 6 between 1 January 2013 and 11 July 2016 by failing to take reasonable care to organise and control its probate and bereavement process responsibly and effectively, with adequate risk management systems, and by failing to treat its customers and those who represented them on their death fairly.

FCA principles for businesses

Principle 3 Management and control             

A firm must take reasonable care to organise and control its affairs responsibly and effectively, with adequate risk management systems.

Principle 6 Customers' interests      

A firm must pay due regard to the interests of its customers and treat them fairly. 

Principle 11 Relations with regulators            

A firm must deal with its regulators in an open and cooperative way, and must disclose to the appropriate regulator appropriately anything relating to the firm of which that regulator would reasonably expect notice.

Once these problems were notified to the board and senior management, they were fixed properly and promptly. But recognition of the problem took too long.  Santander has obviously apologised for the failings and has taken steps since to correct its policies and procedures, but given the recent IT failings which other lenders have experienced, and the problems that many professional estate administrators report in dealing with financial services institutions, it’s definitely worth examining in detail what it is that Santander was found to have failed in; 

  • The probate and bereavement process would start but:

    • it would stall and remain incomplete, meaning that funds would not be transferred to those who were entitled to them despite Santander being informed that a customer had died; or

    • certain funds belonging to deceased customers would not be identified and transferred to those who were entitled to them who were unaware of the existence of those funds.

  • Failing to follow up on communication with deceased customers’ representatives

  • ineffectively monitoring of open probate and bereavement cases to allow it to determine whether cases had progressed to closure.

  • In some cases, funds were held for many years contributing to beneficiaries being deprived of the use of them for a considerable amount of time.

To Santander’s credit it has since 2015 carried out remediation exercises, to transfer funds from affected accounts to beneficiaries. These exercises are almost complete and where possible Santander has located beneficiaries and transferred funds to them (or is in the process of doing so).  Where appropriate, Santander has paid interest on the funds to beneficiaries to compensate them for the delay in their receiving the funds, together with compensation for any consequential loss that was suffered.

Specific Bereavement Principles have since been developed and endorsed by the following British Banking Association (BBA) members and the Building Society Association (BSA): -

  • Barclays Bank

  • HSBC Bank

  • Lloyds Banking Group

  • Nationwide Building Society

  • Santander UK

  • The Royal Bank of Scotland

Source: https://www.bba.org.uk/wp-content/uploads/2016/03/BBA01-458427-v1-Bereavement_Principles.pdf  

Further to the work by the BBA, The Lending Standards Board Financial Services Vulnerability Taskforce recent report focuses on more detailed codes of practice developed under the Taskforce recommendations, namely the Bereavement Principles 3 together with Third Party Access Principles 4.

It is evident in the industry that professionals acting as a third party with authority are still experiencing a Non-Adherence to the one-stop notice recommendation contained in Principle 3.  More work is needed here although developments in this area can be challenging to achieve due to banks legacy systems.

Recommendations were made that banks continue to work towards a full ‘one stop notice’ through intelligent and controlled information sharing.  Any development of services should be appropriate for use across all channels used by customers. 

Vulnerability remains an important topic for the industry, consumer bodies and regulators, with a growing focus on the delivery of fair customer outcomes.  There is a clear culture in the firms to ensure they do the right thing, with support from senior and executive management.  Identification of a customer in vulnerable circumstances, or self-disclosure by the customer, is the first step in enabling firms to gain an understanding of their needs and the possible solutions available.

Estatesearch takes an innovative data and workflow approach to supporting vulnerable customers by empowering the Personal Representatives to notify and collate financial records associated with the customer.  Our systems also help identify and collate historical addresses and previous names of the customer to assist banks in effectively searching their records. 

Find out more about our Additional Costs Warranty and how it can protect you and your client.

Deceased estates notice placement still best practice, Gazette survey reveals

Published - 1st March 2019

A Gazette survey of probate professionals has created a clearer view of the motivations behind deceased estates notice placement.

The good news for best practice is that 80 per cent of probate professionals surveyed will always place a deceased estates notice in The Gazette when they are acting as the executor of an estate.

Placing a notice in The Gazette and in a newspaper ensures that sufficient effort has been made to locate creditors before distributing the estate to beneficiaries. This protects the executor (or trustee) from being liable for claims from unidentified creditors.

Important influences in the decision to place a notice are predominantly:

  • the relationship between the deceased and their family (66 per cent)

  • whether the distribution might be contested (60 per cent)

  • the degree of confidence that the beneficiaries have been located (60 per cent)

But the most important overall reason for placing the notice is to prevent claims against the executor and the firm.

Despite this high level of due diligence, the survey does show that probate professionals don’t always advise clients who are acting as executor to place a deceased estates notice as standard. They are more likely to recommend it if the deceased’s affairs are complex, or if there is a suspected missing beneficiary.

The general picture is that private individuals carrying out probate (DIY notice placers) may be less likely to place a notice in The Gazette, as they are of the view that they know the deceased’s affairs, despite the hidden risks of hidden digital accounts and potential unknown creditors.

Unregulated will writing companies and the rise of alternative business structures offering probate services is seen as a significant threat to the professional wills and probate sector for 28 per cent of respondents.

Over half of respondents said that the value of an estate doesn’t influence the decision to advertise or recommend advertising in The Gazette and, interestingly, 40 per cent said that tax issues and fear of not paying the correct tax are a likely influence on an executor’s decision to place a notice.

Search for (and place) wills and probate notices in The Gazette

For more information please contact The Gazette customer services team on 0333 200 2434 or email customer.services@thegazette.co.uk  

This article was submitted to be published by The Gazette as part of their advertising agreement with Today’s Wills & Probate. The views expressed in this article are those of the submitter and not those of Today’s Wills & Probate. 

Source: Todays Wills & Probate https://www.todayswillsandprobate.co.uk/partner-news/estates-notice-placement-best-practice/