When distributing gifts made in a Will what happens if there is are missing beneficiaries? This short article explains:
Personal Representatives (PRs) have a duty to ensure that the estate is distributed to the correct beneficiaries. This involves first ascertaining who those beneficiaries even are, in the case of a gift made to a group of people for example ‘my children living at my death’. But what happens if the PRs are aware that a beneficiary exists but they can’t find them? They may have fallen out of touch with the testator or they may be difficult to trace.
If a PR distributes an estate and fails to take account a missing beneficiary then they may find that they have acted in breach of their duty. If the missing beneficiary turns up at a later date the PR will be liable to pay them out of their own funds. Thankfully, this can be avoided if the PR takes the appropriate steps before distributing the estate.
The PRs should make all reasonable enquiries to try and find the beneficiary. For most people the first enquiry will be to the deceased’s friends and family as they may know the beneficiaries location. Failing that they should take out an advertisement in newspapers local to the beneficiaries last known whereabouts and an advert in the Law Society Gazette.
Next steps should be employing a genealogist or ‘heir hunter’ to trace beneficiaries, or even a private investigator. This can be very expensive though, so before hiring a PI the PR should consider whether the value of the estate can justify such an expense.
Once all reasonable avenues have been exhausted and the missing beneficiary has still not been found it’s time to start thinking about how to deal with the administration. At this stage a PR has multiple options open to them:
- Keep a reserve fund
The PRs could hold back a reserve fund equal to the amount of the missing beneficiary’s legacy. They can then distribute the rest of the estate as normal to the known beneficiaries. If the missing beneficiary comes forward in future (within 12 years of the testator’s death) they can be paid their share. This avoids the distribution being held up for too long.
- Take out missing beneficiary insurance
They could distribute the estate to the known beneficiaries and take out insurance against the missing beneficiary turning up and claiming. This will avoid the beneficiary claiming against the PR as the insurance policy will satisfy their claim. The amount insured must be large enough to cover the value of the legacy itself as well as any interest.
- Distribute with an indemnity
The PR could distribute the funds to the known beneficiaries and obtain an indemnity from them. If the missing beneficiary comes later forward makes a claim the PR will be able to recover the money from them. This is more appropriate for small sums and should be done with caution. There is always the possibility that the missing beneficiary will claim and the indemnifying beneficiaries will be unable to meet the costs.
- Court intervention
Finally, the most time consuming and expensive option. The PRs could apply for leave from the court to distribute the estate under Part 64 of the Civil Procedure Rules 1998. This is known as a ‘Benjamin Order’ (from the case of Re Benjamin). This allows the PRs to distribute the estate on the presumption the court makes the order on. This presumption is usually that the missing beneficiary has predeceased the testator leaving no issue.
Before such an order can be granted the PRs must show the court what steps they have taken to establish the beneficiary is still alive and to trace them. The court will only grant the order if they agree that all that can be done, has been done.
If the missing beneficiary later turns up they can try and claim their share from the other beneficiaries, however the PRs are protected.
Written by Siobhan Rattigan, The Society of Will Writers and Estate Planning Practitioners