When dealing with the estate of a deceased individual, the executors or personal representatives who have the responsibility of dealing with the administration of the estate may find that the address of a beneficiary on the Will is not current or there may not be an address mentioned in the Will at all. This can cause great difficulty for the personal representative as ultimately they are liable to that beneficiary for any funds due to them from the estate.
The personal representative's duty to the beneficiaries of an estate
In accordance with section 25 Administration of Estates Act 1925 the personal representative’s duty is to “collect and get in the real and personal estate of the deceased and administer it according to law…”[1] In practice this means that the personal representative must collect in or realise the deceased’s assets, pay any outstanding debts at the time of his death and costs arising from the administration of his estate (legal fees, tax, funeral costs etc) and finally distribute the funds in the estate to the beneficiaries named in the Will, if there is one, or if none; in accordance with the rules of intestacy which sets out the order in which the beneficiaries of the deceased’s estate are to receive the estate.
The personal representative is accountable to the beneficiaries of the estate for the assets in the estate and must be able to demonstrate to them how their share of the estate is arrived at and distribute this to them. If the beneficiary cannot be traced the executor has a positive duty to take all reasonable steps to find them. If a missing or unknown beneficiary surfaces and is successful in proving their claim for a share of the estate, and the estate has already been distributed; the newly discovered beneficiary can trace the funds to the hands of the known beneficiaries who have received the entitlement of the estate, but crucially if these beneficiaries no longer have the funds the personal representative is ultimately liable to the missing beneficiary for those funds. In some circumstances the beneficiaries who have received their entitlement and have had to repay a portion of it to the newly found beneficiary may also seek recompense from the personal representative.
It is advisable therefore to delay the distribution of the estate until the personal representative has exhausted all reasonable steps to locate the missing beneficiary.
How can the personal representative protect themselves?
Section 27 Trustee Act 1925 Notices
To protect themselves and the estate from potential claims from the missing or unknown beneficiary, the personal representative can take practical steps to demonstrate that he has made a reasonable search for that beneficiary. For example, enquiries can be made with the known beneficiaries of the estate or even those who were close to the deceased to determine if they know of missing beneficiary or their whereabouts. They should also document their efforts as evidence should any claim be brought against them.
The personal representative can also publish a section 27 Trustee Act 1925 notice, usually called a statutory notice, in the local newspaper where the deceased lived, where the missing beneficiary was last known to be living and in the London Gazette. While this statutory notice will only give the personal representative protection against unknown beneficiaries, it may also assist in locating the missing beneficiary and again demonstrate the efforts the personal representative has taken to find them.
This can be done at the expense of the estate.
‘Heir Hunters’
The personal representative should also consider employing the services of estate researchers or as they are more commonly known ‘heir hunters’. They would carry out a detailed search for the missing beneficiaries including searches through birth, death and marriage records as well as electoral rolls to trace the beneficiaries. At the conclusion of their investigation many of the estate researchers will issue a report of the findings to the personal representatives, evidencing their efforts to locate the missing beneficiaries.
However, before engaging the services of an estate researcher the personal representative should consider whether it is reasonable to incur the costs of instructing them taking the value of the estate and the missing beneficiary’s share of the estate into account.
When to distribute the estate
If the estate researchers’ efforts, the statutory notices and enquiries made of the known beneficiaries and those close to the deceased all prove unsuccessful, and the personal representative can demonstrate that he has taken reasonable steps to find the beneficiary, they may wish to consider distributing the estate; particularly if they are facing pressure from the known beneficiaries to distribute the estate. However, the personal representative should consider doing so in a way which gives them, the estate and the other beneficiaries some protection if the missing beneficiary later emerges.
The personal representative can consider retaining the missing beneficiaries share and distributing the remaining beneficiaries. However, this may not be practical as the missing beneficiary would have 12 years to claim their entitlement from the estate.[2] Alternatively, they can distribute the entire estate, including the share the missing beneficiary would be entitled to, to the known beneficiaries on the condition that the known beneficiaries indemnify the personal representative should the beneficiary surface. This also presents its risks, as if the known beneficiaries no longer have the funds when the missing beneficiary makes themselves known, formerly lost beneficiary would still be able to pursue the personal representative for their entitlement.
A more practical option may be for the personal representative to apply for an insurance policy for the portion of the estate that would pass to the missing beneficiary. Should the missing beneficiary be found or make themselves known to the personal representative a claim can be made against the policy for the amount. This would enable the personal representative to distribute the whole of the estate. However, the personal representative should consider the policy wording carefully to determine if any interest that would be payable from the estate would also be included. The personal representative should consider whether the cost of the policy premium in comparison with the value of the missing beneficiary’s share of the estate is reasonable.
The personal representative may also seek to apply to court for what is called a Benjamin Order. The Benjamin Order will give the personal representative the court’s permission to distribute the estate usually on the basis that the missing beneficiary has died before the deceased. The court is unlikely to issue this order unless the personal representative can show that they have taken all reasonable steps to locate the missing beneficiary. If the missing beneficiary is later found, they can still attempt to recover their entitlement from the beneficiaries who have received the estate but the personal representative will be protected from their claim.
Ultimately, the personal representative is accountable to all the beneficiaries of the estate including those which are missing. Failure to take reasonable steps to find the beneficiary and protect their interest in the estate can come at a great personal cost to the personal representative should the beneficiary traced at a later date.
Should you wish to discuss any of the above issues please contact one of our Wills,Tax & Estate Administration experts who will be happy to assist you.
[1] Section 25(a) Administration of Estates Act 1925
[2] Section 22 Limitation Act 1980
