No stone unturned when it comes to missing beneficiaries

Sometimes, the executors or trustees of estates find themselves administering that estate and are unable to distribute to one or more of the heirs because those persons can’t be found or won’t communicate with the trustee.

However, this does not mean the trustee or executor is excused from doing their duty. If another entitled beneficiary turns off post the estate’s distribution or should someone change their mind, questions may be asked about the way the trustee has administered the trust and that person could face a breach of trust claim. All practical solutions should be examined so that no stones are left unturned in the search for beneficiaries.

First, trustees should concentrate on contacting or locating the missing or uncooperative beneficiary. They should review their files, contact the relevant people, search online and through social media platforms, advertise in relevant publications such as local newspapers and consider hiring a private detective if this is necessary.

All effort made

Such efforts may locate the missing beneficiary or confirm that the person has died but even if such endeavours are undertaken by the trustee who thinks they will be unsuccessful, it is crucial to show that all effort to locate missing heirs has been made, and the searches and inquiries should be well documented.

‘Reasonable’ steps can be difficult to assess precisely but a general rule is that the expense of the actions taken to locate the heirs should be proportionate to the size of the estate/trust fund. Reasonable inquiries for a small trust fund may not be sufficient for a larger value.

In the case of Evans v Westcombe the deceased died intestate, leaving tow children, a song and a daughter. Letters of administration were granted to the daughter and according to the rules of intestacy, she held the estate on statutory trusts for her daughter and herself and her estranged brother.

Presumed dead

The daughter had been estranged from the brother for almost 30 years and presumed him to be dead, based on conversations she’d had with other family members.

Acting on legal advice, she advertised in one UK-wide newspaper (although not two as she was instructed) and took out missing beneficiary indemnity insurance but did not conduct any further efforts to locate her brother.

Some years later, the brother turned up and took legal action against his sister for the way she administered the estate of their late father. He alleged that there were no reasonable grounds for concluding that he had died and that his sister’s reliance on friends and family beliefs was unreasonable.

Missing beneficiary indemnity insurance

While he received the proceeds from the missing beneficiary insurance indemnity policy, he claimed there was a shortfall and that he was entitled to interest. He also disputed the administration expenses charged to the estate.

However, in this example the court found that the deceased’s daughter had acted reasonably and ought to be excused. While it was apparent that she could have done more to locate her estranged brother or protect his interest in their father’s estate, the court accepted that she had acted reasonably.

The court emphasised the defendant daughter’s reliance on legal advice. While noting that acting on legal advice is no ‘passport to relief’, the court accepted that she had trusted her solicitors to advise her on the appropriate course of action to take.

Practical solutions

Secondly, the next phase in the process is to decide how to proceed. If all reasonable steps to contact the missing beneficiary have been taken, what practical solutions are there?

One is an order declaring the beneficiary deceased or absentee. There is a distinction between legitimate missing beneficiaries and those whom the trustee or other relatives have lost contact with. Most jurisdictions provide a mechanism where individuals can be presumed dead. Various relatives can apply for this order as well as other persons the court considers having “sufficient interest in the determination of the application”.

This enables the trustee to treat a missing beneficiary as dead but is likely to be appropriate in only very limited circumstances. There is also the ‘Benjamin order’ that refers to a 1902 English case Neville v Benjamin, relating to the beneficiary of a deceased estate who had not been heard of for many years and the course of action is for a trust fund is paid to court or another relevant party.

Benjamin order

In Neville v Benjamin, the missing heir was the son of the deceased. The deceased had ordered his estate to be divided equally among his children. The court considered it was highly likely the missing son had died. Rather than declaring him legally classified as dead, the court ordered that the trustees were at liberty to distribute the estate on the basis that the man had died (and without a wife or children).

The ‘Benjamin order’ protects remaining beneficiaries from the sudden reappearance of the missing beneficiary and a subsequent claim on the estate. It enables the estate to be distributed and protects the trustees from accusations of a breach of trust because they have acted according to the order of the court. Should the missing beneficiary reappear, then that person’s rights are preserved.

There are other options. In some limited circumstances, and subject to the terms of the trust deed, the trustee might be able to declare an early termination date for the trust and appoint the trust fund to a default beneficiary, such as a charity. Missing beneficiary indemnity insurance can also provide protection.

Trustees also need to consider any dormant accounts or funds that may have been overlooked or deposited in accounts that have been forgotten.

Trustees and administrators need to take all the practical and reasonable steps they can to locate missing beneficiaries so that they can discharge the estate and look to third parties such as private investigators and probate genealogists for expert advice where appropriate.

This article is drawn from a longer case study that appeared on the JS Dura website. It is intended for informative purposes only and is not legal advice.