Probate genealogists specialise in identifying and tracing heirs, and locating people who may be beneficiaries under a will or on intestacy. They are frequently instructed by executors, administrators, personal representatives and trustees, or may act directly for the potential beneficiaries. They commonly offer a range of different fee options, depending on the circumstances in which they are acting.

Contingency fees are currently the most popular fee option, as the genealogist’s fees are not charged to the estate, whether or not a missing beneficiary is located. However, there has recently been criticism of contingency fee arrangements, and even calls for them to be prohibited.

Whilst it should be noted that this criticism has been generated by one rival genealogy firm alone as part of a marketing exercise, this Briefing Paper describes how contingency fees in the probate genealogy profession work, and explains their potential advantages.

How do the different fee options work?

Under a contingency fee agreement, customers may agree in advance a limit to the percentage commission that will be payable out of the inheritance of the successfully located beneficiary once the estate has been distributed. If the search by the genealogist is unsuccessful, whether because the missing heir is dead, cannot be found, or does not exist (e.g. a will leaves everything to the children of the testator’s son, but there are no children), then no fee is payable to the genealogist by the estate and the inheritance of a previously known heir, or heirs, will remain unaffected. The genealogy firm is solely responsible for all charges incurred, such as disbursements, agents’ fees, administration or any other charges. If a missing beneficiary is located, and his or her claim on the estate is successful, the genealogist’s fees are paid by the estate out of that beneficiary’s net share of the inheritance, as an agreed percentage figure.

Alternative fee methods used by probate genealogists include the “budget” fee, the fixed fee, the estate/trust agreement, the hourly rate and a “deferred” fee (the latter is not offered by Finders).

In the “budget” research fee structure, a fee limit is set in advance and a report is produced once that limit is reached, irrespective of whether or not the research has been completed. Under a fixed fee arrangement, a previously agreed fee is payable only upon achieving the goal set at the outset.

The estate/trust agreement allows a percentage fee to be deducted from an heir’s entitlement through a signed agreement with the estate or trust administrator, executor or trustee. This is primarily used where, for example, the heirs are minors, or otherwise vulnerable, and a traditional contingency fee agreement requiring the heir’s signature is not appropriate. In this instance fees are, again, only payable on final distribution of the estate or trust.

Some genealogists work only an hourly rate basis, charging the estate a certain amount per hour worked. Finders believe that the availability of a range of fee options provides comprehensive consumer choice to cover most circumstances.

A “deferred fee” may be offered when there are no known next of kin and the genealogist agrees a fee with a solicitor, payable from the estate, but only after a beneficiary has been found, an Administrator is in place and the solicitor appointed to act for the Estate. Such ‘secret’ deals on fees are unknown to any heirs to the Estate and are potentially unlawful as they are arranged prior to the issue of a Grant and, therefore, without any legal authority in place. Hence Finders does not offer this option.

What are the advantages of contingency fees?

Contingency fees have certain advantages over the other fee structures. As they are only chargeable when the estate is distributed to the heir(s), they do not risk potentially indebting any of the parties involved. This is especially relevant in cases where the estate is or becomes insolvent. Contingency fees also facilitate cost control, as the percentage limit can be set in advance. They entail no hidden charges and may be re-negotiated to manage expectations should new factors come to light while the research work is ongoing.

On the other hand, there are clear disadvantages in the use of the hourly rate fee. It is not usually possible to calculate the amount of time that will be required to find a missing beneficiary at the time of engaging probate genealogists. If the genealogist is engaged on an hourly rate, this can result in much higher costs than originally expected. It is possible for the fee payable on a fixed fee basis, or over several budget fee stages, to be disproportionate to the sums involved, and even to be more than the total inheritance recovered. And these fees are payable regardless of the outcome. In a worst-case scenario, no missing beneficiaries are traced, and the fees owing to the probate genealogist out of the estate are more than the total inheritance, resulting in a debt owed by the estate. The budget or fee limit system, further, is open to abuse, in that research may be halted prior to a definitive conclusion being reached simply in order to extract further funds from the estate.

While there is some legal uncertainty, the court has recently held (In the Estate of Cara Prunella Clough-Taylor [2002] EWHC 2460 Ch) that the costs of recovering an asset for the benefit of one beneficiary of an estate should not come from the residue of the estate. Contingency fee arrangements are more in line with this rationale than other fee structures in which the payment for tracing the missing beneficiary is made out of the estate.

A further advantage of contingency fees is that they act as a great incentive for the genealogist to complete the research as efficiently, thoroughly and as quickly as possible, as payment will only be secured upon distribution of the estate.

Finally, contingency fees tend to be the best, or even the only, option available for bona vacantia estates (usually intestate estates where there appear to be no heirs), where the lack of a Grant of Letters of Administration means that no person has the legal authority to pay any fees from the estate or to agree to the subsequent payment of deferred fees to a third party.

The acceptability of contingency fee arrangements has been questioned, on the basis that they may be abused in order to exploit vulnerable beneficiaries, who may be induced to sign contingency fee agreements by misrepresentation. Indeed, the problems relating to firms that engage in any improper behaviour should be addressed. Firms or individuals intent on ignoring proper and professional conduct for their own gain will always consider methods of unscrupulous behaviour that a reputable firm would never employ. However, this issue would not be tackled by discouraging solicitors from instructing probate genealogists on a contingency fee basis. Discouraging contingency fee agreements would be a disproportionate reaction and would restrict consumer choice. If contingency fee agreements were not available, there would be cases where a search for a missing heir is simply not undertaken, and others where the estate of known heirs is used up in searching for missing heirs.

Conclusion

Contingency fee arrangements may not always be the most appropriate method of charging in every circumstance. However, they provide customers with a wider choice of fee option, and can carry less risk than some other options for the estate, and for beneficiaries.

Finders can be contacted at 6-8 Vestry Street London N1 7RE. Tel: +44 (0)20 7490 4935 www.findersUK.com e-mail: [email protected]

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