When a person passes away the personal representative has to identify the beneficiaries of the estate so that the funds can be distributed to the right people.
So what happens when a beneficiary cannot be located?
This could happen where a will does not provide an address for them, or where they have subsequently moved. It could also be where the deceased died intestate (without leaving a will), and family members who had no contact with the deceased are due to benefit.
The first port of call will usually be in taking practical steps to try and locate the missing beneficiary. This could take the form of asking the deceased’s friends and relatives to see whether they have any information that may be useful.
Assuming this does not yield success, the personal representatives can instruct tracing agents to assist. Such agents have quite a high success rate in finding missing beneficiaries, both nationally and internationally.
If the above steps are not successful then the personal representatives will have to decide on the best way to proceed. There are a number of options open to them:
- If the sum of money involved is modest then purchasing missing beneficiary indemnity insurance may be the most cost effective option. This has the benefit of allowing the administration of the estate to be finalised with the certainty that if the missing beneficiary subsequently emerges the insurance will pay their entitlement. The disadvantage of this approach is, of course, the associated costs.
- Another option is to keep a reserve fund to pay the missing beneficiaries’ share in the event that they emerge within the 12 year limitation period. This would only generally be feasible for smaller estates, and has the distinct disadvantage of meaning that the personal representative’s obligations potentially continue for a number of years.
- The personal representatives can also consider obtaining an indemnity from the other beneficiaries. This would mean paying the missing beneficiaries’ share to the other beneficiaries, and if the missing beneficiary subsequently emerges then having them pay the legacy. Personal representatives should exercise extreme caution before proceeding under this option. The personal representatives are ultimately liable to repay the sum personally if the other beneficiaries are unable or unwilling to pay.
- Where the amount due to the missing beneficiary is large, it may be cost proportionate for the personal representatives to obtain a ‘Benjamin order’. Broadly speaking, this is an application to the court requesting permission to distribute the estate on the basis of a particular factual version of events (e.g. the missing beneficiary has likely died). If that version of events is subsequently revealed to be untrue (e.g. the missing beneficiary emerges) then the personal representative will be protected from liability, although the other beneficiaries may still be liable to repay the additional sums that they have received. The costs of making the application can be significant, and potentially prohibitive if the amount of the legacy due to the missing beneficiary is limited. This is because the court will require the personal representative to satisfy the court that they have undertaken all reasonable enquiries to establish the position, and that there is no reasonable prospect of establishing the true position without disproportionate expense.
- The final option is to pay the funds due to the missing beneficiary into the court under s.63 Trustee Act 1925. This may be the option that is least attractive to the other beneficiaries as it would mean that the sums otherwise due to the missing beneficiary are otherwise unavailable.
There is no general rule on which of the above options is the most prudent. It will depend on the facts of the particular case.
From the perspective of a testator (a person making a will) providing contact details of beneficiaries in the will, and reviewing the position periodically, may save their personal representatives the time and expense of having to consider the above steps.
Our Tax, Trusts and Estates Department can provide further advice on the above issues.