Probate research - who should pay the fees?
04 August 2010
Simon Barber, Case Manager, Title Research
Generally speaking, the costs of administering an estate, as a usual part of probate practice, will be deducted from the estate as a whole. These costs are usually broken down into IHT and any other taxes payable and solicitors’ professional fees and disbursements (e.g. probate fees). We consider here one of the disbursements occasionally appended to the solicitor’s professional fee.
From time to time, the solicitor will need outside help to locate one or more missing or unknown beneficiaries. This service will have to be paid for and the question of where the costs should lie is a question we are often asked by clients.
Solicitors’ costs will almost always be based on a reviewable time-and-expenses or fixed fee budget basis, estimated in advance and agreed with the PR before taking instructions and will be met by the estate. Similarly, the cost of other professional services will be quantified based on the time necessary to complete the work – and will be met by the estate.
Equally, genealogists are able to give fee estimates for any particular matter, based on the nature of the assignment and their professional understanding of how long it will take to resolve. It follows therefore that the fees of the genealogist should also be met by the estate as a whole.
There are many circumstances in which the probate practitioner can come under pressure to treat the costs of research in a different way, as we can see in the following examples:
Missing legatee - case study
John Smith left cash gifts to a number of friends with the residue of his estate being left to members of his family. Unfortunately, the whereabouts of one of these legatees was unknown at the point of distribution and a firm of genealogists is approached to establish his current address.
We often deal with such cases at Title Research and the question often asked by clients is, who should pay the costs of locating the missing legatee? Should the costs come out of the share due to the legatee or out of the estate as a whole? In these circumstances, the Testator clearly wished to remember the legatee with a specific gift and we would therefore advise the costs of research should be taken out of the estate as a whole in the same way as any other estate administration cost. This ensures the wishes of the Deceased can be fully respected.
The interim distribution
On occasion there is sometimes no option but to deduct research costs from the relevant legacy if the rest of the estate has already been distributed. This can often cause problems, particularly when the legacy at stake is very modest. As such, we would always urge our clients to approach us for an opinion as soon as they suspect there may be one or more missing beneficiaries.
The intestacy
Quite commonly our clients approach us with a partial family tree, often with either the paternal or maternal family fully known and only one side requiring research to locate beneficiaries. The temptation can be for research costs to be apportioned to the unknown side of the family and pressure may be exerted by the known beneficiaries to protect their share. This could be secured by instructing a genealogist who charges a 'contingency fee', where the genealogist will secure a percentage (10%-40%) of the missing beneficiaries' entitlement, whilst the known heirs share remains 'intact'. However, is it the fault of the unknown beneficiaries that they are unknown to the Administrator? Moreover, as statutory next of kin, missing beneficiaries are no less entitled to a share in the estate.
A PR to an intestate estate is highly likely to be a beneficiary as well. Thus the conflict of interest: to instruct or authorise (or even condone) a genealogist to locate missing beneficiaries operating on a “contingency fee” basis will almost always mean that, because the fees will be taken from the missing heirs’ entitlements, the PR’s share of the residue will not be affected. The PR’s duty to locate the beneficiaries conflicts with his financial interest as a beneficiary himself. This means that the PR is conflicted out of instructing or authorising a 'contingency fee' approach to locating missing beneficiaries – and the costs of research should therefore fall on the residue.
Conclusion
If it is part of a PR’s duty to locate the beneficiaries to the estate and, ultimately, to account to them then the cost incurred by PRs in their capacity as PR should be borne with few exceptions by the estate as a whole.