When someone dies they leave an estate that must be distributed to the correct beneficiaries. Sharon Crosby, associate in Lodders’ private client practice, explains the steps to help personal representatives find every beneficiary, and how and why to protect themselves from future challenges.
Who is responsible for finding beneficiaries of a deceased’s estate?
The personal representatives (PRs) of a deceased person’s estate (money, property and possessions) are responsible for finding beneficiaries (people who will inherit). PRs should make sure they understand who they need to locate.
If there is a will
If the PR is named in the will, they are called the executor (there may be more than one executor) and may need to locate beneficiaries, or all the people who make up a class of beneficiaries left a gift by the deceased. If a beneficiary in a will has died for example, what happens to the gift? Does it fail or pass to the relatives of the intended recipient?
If there is not a will
It may also be necessary to locate beneficiaries where the deceased died intestate (without leaving a valid will). Again, this would be the responsibility of the PRs, who in this situation would be one or more of the relatives of the deceased who take out the grant of representation. The PRs must identify all beneficiaries within the class of those entitled to inherit the intestate’s estate.
If there is a will, it’s also important to think about whether the whole estate been disposed of by the will, or is there a partial intestacy? As an example of why this is relevant when dealing with an intestacy or partial intestacy, if the deceased’s father is still alive, he is a potential beneficiary. However, if he was not named on the deceased’s birth certificate, there is a rebuttable presumption that the father, and all other relatives connected through him, have predeceased and do not need to be traced (s.18(2) Family Law Reform Act 1987 as amended by s5 Inheritance and Trustees’ Powers Act 2014). This presumption can be overturned, and so professional advice should be sought in this situation.
How can you find missing beneficiaries?
To find missing beneficiaries, a PR can carry out some investigations themself and these are often effective. Often PRs trace beneficiaries through asking the right questions of the right people. A good place to start is simply talking to people who knew the deceased as they may be in contact with the missing beneficiaries. However, there are some other options available:
• PRs can also advertise in local and national publications to see if the missing beneficiaries come forward. This sort of advertisement should not be confused with notices placed in The Gazette by PRs under section 27 of the Trustee Act 1925, which protects them from claims from unknown beneficiaries – in this instance, the PRs are trying to locate named individuals, people within a class of relatives, or known relatives of the deceased.
• Another option is for the PRs to attempt to locate records on births, marriages and deaths from the General Registry Office, which can help to determine what has happened to certain people. If a named beneficiary has died, then this may be the end of the enquiry, depending on the terms of the will. However, if the deceased died intestate then the fact a beneficiary has also died is likely to cause further investigations.
• This is often the stage where PRs consider using a genealogy company who specialise in locating beneficiaries. They can also assist in providing the documents to prove a person’s entitlement to an estate, such as birth, marriage and death certificates. There are many specialist companies to choose from and they may work based on a fixed fee or a percentage of the estate value.
What happens if you don’t make reasonable efforts to look for missing beneficiaries?
PRs are responsible for the correct distribution of the estate. If they fail to make reasonable efforts to locate missing beneficiaries, and those beneficiaries come forward later, the PRs could be personally liable.
PRs must take all reasonable steps to ensure that either they locate the beneficiaries, or they protect themselves if searches for the beneficiaries are inconclusive. If they do not, they could find themselves having to pay the beneficiary for their share of the estate.
How can the personal representative protect themselves?
Deceased estate notices
PRs can place a deceased estates notice in The Gazette to try and encourage creditors and beneficiaries to come forward. It should be noted that these notices only provide protection from claims by unknown creditors and do not protect PRs from beneficiaries named in the will. In addition, deceased estates notices only protect PRs – the other beneficiaries could find themselves having to pay back a share of their inheritance in the event of a genuine claim.
Indemnities: Sometimes beneficiaries will want PRs to distribute an estate quickly. In this case, the PRs may obtain an indemnity from the known and found beneficiaries, so that if a missing beneficiary did come forward, the others would pay the sum due to the missing beneficiary from their share of the funds.
However, PRs need to exercise caution in this situation. Can they be certain that the other beneficiaries will still have the funds available? PRs should take legal advice before accepting any indemnities in these circumstances.
Another option for PRs at this stage may be missing beneficiary indemnity insurance. This provides protection for the PRs and the other beneficiaries from a future claim and can be a useful tool in allowing the estate to be distributed. The PRs will need to prove that they have taken reasonable steps to attempt to locate the individuals concerned and this often involves instructing a genealogy company. There may also be conditions attached to the policy and of course the premium will have a cost. PRs must consider whether this is the best course of action. However, this is often a cheaper option than an application to court.
Benjamin Orders: A Benjamin Order is a court order to distribute the estate in a certain way. In the case of missing beneficiaries, the order could be to pay out the estate to those beneficiaries who have been located. The PRs must demonstrate the steps taken to locate any missing beneficiaries, and the court may direct that further investigations are undertaken. If an order is made, this protects the PRs, but not the other beneficiaries of the estate.
It will also be more costly to the estate than insurance, however there may be cases where insurance cannot be obtained or there are other reasons why this is the most appropriate course of action. The PRs should seek legal advice before considering whether to apply for a Benjamin Order.
Payment into court: If the PRs have been unable to determine whether a known beneficiary is alive, and they have been unable to discharge their responsibilities in any other way, it is possible to make a payment into the Court Funds Office.
This provides a good discharge for the PRs, but again, they need to meet certain conditions before the court will accept payment. This might not be the preferred option of the other beneficiaries, who may otherwise have received a greater share of the estate. Much will depend on the circumstances and the PRs should consider obtaining legal advice in this situation.
Sharon Crosby is an associate in the Private Client team at Lodders Solicitors and a specialist in estate administration, wills, probate, lasting powers of attorney and trust administration.
This article first appeared in The Gazette, read it What should you do if a beneficiary cannot be found? | The Gazette.