Costing solutions to common executry problems

A description of the options when instructing a genealogist

The Journal, April 2003, page 45

Each year, a number of solicitors and other practitioners involved in executry administration will experience problems finding beneficiaries. Sometimes they will be able to find the missing heirs under their own steam or might approach an outside specialist for help. If not, an approach to an insurance company for a Missing Beneficiary Indemnity (MBI) may solve the problem.

However, underwriters of MBIs are becoming much more selective about the risks they take on. They will often require research to be undertaken to try to find the stray beneficiaries before considering the risk in detail. Most of the time, a report from a reputable genealogist will satisfy them that all reasonable steps to find the beneficiaries have been taken before they go on risk. In fact, the research needed to satisfy the insurers will frequently uncover the missing heirs and obviate the need for the indemnity.

How to instruct a genealogist

A professional firm will be looking to help you close your file as soon as possible. It really does help if you can submit as much information as possible at the outset so that the researcher can write you a reasoned assessment of your case. This will give you his view of your problem and how it can be solved and should also discuss costs and time-scales. On receipt of this written expert opinion, you can consult with your lay client and then go ahead and instruct the researcher accordingly. The investigation can start immediately thereafter.

Costs – who pays?

One of the questions that comes up regularly is as to costs – or, more specifically, where should the costs of the MBI and / or the research lie? Conventional wisdom suggests that, just like the solicitors and others providing a professional service to the executry estate, insurers’ and / or genealogists’ costs should generally be regarded as an expense of the administration as a whole, rather than being offset against any particular share or shares in it.

The estate?

With this in mind, practitioners will usually instruct genealogists to locate missing beneficiaries on a recorded time and disbursements basis, at the expense of the estate as a whole. Typically, the researcher and his instructing principal will agree a budget figure within which the researcher makes such enquiries as the budget can support. Perhaps further enquiries will be necessary. If so, the researcher can negotiate a fresh budget figure with his client and the investigation will continue. This is an entirely transparent approach: the solicitor, as instructing principal, can call the researcher to account for the monies spent and to demonstrate the nature and quality of his enquiries – and their results. Next of kin enquiries can be notoriously unpredictable in scope and duration. However, as long as there is good communication between solicitor and researcher, and recognition that the ultimate span of the investigation may differ from that anticipated at the outset, matters should move along smoothly. Most importantly, the practitioner (and his or her lay clients) can direct the pace of the investigation and are in control of its costs. If necessary or desirable, the practitioner can apportion some or all of the costs of finding one or more heirs against their shares in the estate in question.

The beneficiaries?

Most firms of genealogists will typically offer their practitioner clients a range of costing options for locating missing heirs. Many will include a “contingency fee” option. This will usually involve the researcher acting independently of the practitioner and seeking to agree a commission-based “contingency fee” with each heir he locates. This practice can be very lucrative as commission fees range from 5% or 10% to more than 30% (plus VAT) of the share in the estate due to each located heir.

What’s the difference?

Perhaps this is a good place to distinguish between (i) the researcher’s recorded time and disbursements and the extent to which (if any) they are apportioned against any specific shares in the estate and (ii) the “contingency fee” approach charged by the researcher (and its level – often decided without reference to the practitioner or the executors) which will always fall wholly on the share due to the located beneficiaries.

To the practitioner the “contingency fee” approach can seem outwardly attractive, especially when they (and their executor clients) are told that the costs of finding missing heirs will be “at no direct cost to the estate” as is widely claimed. In fact, this is simply not correct – as a glance at the payment of the “contingency fee” to the genealogist in the estate accounts will reveal.

True contingency fee?

I’ve placed the expression “contingency fee” in inverted commas in the context of heir location in this article because it seems that these arrangements are not true contingency fees in the sense that a litigator might understand the term. We are, after all, dealing with beneficiaries’ entitlements here, rather than pursuers’ claims.

Imagine that a genealogist approaches you with news of your entitlement to share in an estate, which he will reveal in exchange for a “contingency fee”. He has taken no risk at all in terms of establishing your entitlement – his only risk is that you will not sign his fee agreement. Probably, you will sign and he will be paid. However, your entitlement arises from the will, or the intestacy rules – and the only reason the genealogist has found you is because of it.

On the other hand, a true contingency fee (or at least something that looks more like one) might obtain were I to bring an action against an estate. In such a case, I might agree with my solicitor that her fee should be deducted from my award, if any. The merit of my claim would be reflected in the outcome of the litigation, as would the fee.

Interestingly, it seems that the “contingency fee” approach to costs of tracing beneficiaries is falling out of favour with practitioners. This is perhaps not startling, given the litigation in overseas jurisdictions in which such agreements have been found to be unenforceable*.

Conclusion

In any event, practitioners might consider asking themselves: should they instruct researchers to locate missing beneficiaries on a footing which accurately reflects the time, resources and expertise needed to resolve the matter, or should they leave it as a matter for negotiation between the genealogist and the located heirs? In either case, the estate will be reduced by the extent of the costs. The result of adopting the “contingency fee” approach, however, will very often be a greater cost to the estate and  significantly reduced net shares in it being distributed to the found beneficiaries.

Nicholas Beetham LLB is Relationship Manager – Trusts and Estates at Title Research. He has written and lectured extensively on the subject of missing beneficiaries and the apportionment of costs of finding them or insuring against their independent emergence. Title Research is authorised as an external CPD provider by the Society of Trust and Estate Practitioners.

*Further reading: “The heir-locator’s lost inheritance” [1997] MLR 60:02;

Rees v De Bernady [1896] 2 Ch 437; McElroy v Flynn [1991] ILRM 294;

Fraser v Buckle [1996] ILRM 34; Evans v Westcombe [1999] 2 All ER 777.