Estate administration best practice roundtable: Best of Intentions

 

 

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THE PANEL

Matthew Duncan, Partner, Kingsley Napley

Miles Croally, Barrister, Field Court Chambers

Victoria Mahon de Palacios, Senior Associate, Wedlake Bell

Neil Fraser, Partner, Fraser and Fraser

Simon Mitchell, Partner, Adams and Remers

Terence Bennett, Senior Associate, Charles Russell Speechlys

Chair, Clarissa Dann,PCA

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Clarissa Dann: When should a will search be conducted? Before the grant of probate or the letter of administration, or not? At what point would you even look to see whether there was one?

Simon Mitchell: Well, who is your client? You don't want to prove the wrong will to start off with.

Matthew Duncan: This can happen.

Terence Bennett: It can happen because there's a later challenge to the validity of the will. So that's not necessarily a will search issue, that's the potential validity of the will, for example, a capacity issue. Occasionally, something is found in a desk drawer, which turns out to be a testamentary document.

Neil Fraser: Or the bank does not allow you to open a security box.

Terence Bennett: That's until you've got a grant of probate to get into it.

Neil Fraser: I've had a case this year where, when doing a property search, we located a draft will. I phoned the solicitors back, I knew there was a security holding box at the client's bank and, after a six-month battle, they refused to open it until I took out a grant. When I took out the grant, we found a will in it and then they started objecting about the expenses we had incurred administering the estate until we got the grant. I think that's part of the problem isn't it? There isn't a definite time. You start searching for the will and the expenses clock starts ticking.

Matthew Duncan: We tell clients not to store their wills with their banks for that reason. You can't get hold of them. It's often the case that you get relatives neglecting to ask even the most basic of questions, such as whether the deceased wants to be cremated or buried. If those instructions are in the will, it's too late. Clients who should have been buried get cremated… Solicitors get contacted if there is already a relationship with the family.

Victoria Mahon de Palacios: I think it's very important to look for a will as soon as someone has died because, not only might there be wishes regarding cremation or burial, but the deceased may have wanted to donate their organs.

Although we advise our clients to have a chat with their families to clarify their wishes, many don't.

Clarissa Dann: The next stage is then who should do the will search and when should it be done? We're back to this issue of timing.

Terence Bennett: We are back to the question of who the client is. A solicitor can't necessarily be instructed to do a great deal in relation to an estate until we know who the person in front of us is, i.e. in what capacity they are acting.

Neil Fraser: I think there is a major problem in that, of all the will search companies, they will all take instruction whereas a solicitor is more hesitant to take instruction unless they know someone is authorised to give that instruction.

Matthew Duncan: Someone has got to pay for it. Who's going to pay the fees?

Terence Bennett: And we have to demonstrate for compliance purposes that clients are instructing us as executors and that there is a testamentary document.

Simon Mitchell: In countries such as Spain for example, there is a central wills register and your will is not valid until it's actually been submitted to the register; we don't have that here in the UK. Wills are stored all over the place and if there was that kind of central scheme here, it would remove the problem at a stroke, but who is going to set it up and who's going to pay for it?

Matthew Duncan: There is one company who do something like that; Certainty.

Simon Mitchell: I think the wider point about Certainty is that, while I'm personally not involved in the renewal of my firm's indemnity insurance, my understanding is that for the first time this year, the insurers have asked us: 'Do you use Certainty?'

Neil Fraser: If we get advised that there's a will around, is it sufficient enough to conduct a search through Certainty?

Miles Croally: A wills search can include a whole range of things. It can start with searching the house, contacting the deceased's banks, former professional advisers, advertising and so on.

Simon Mitchell: I think we solicitors are at risk of being a bit like Canute, trying to hold back the tide, especially now that the end result is we're going to be hit in our pocket in terms of indemnity premiums if we don't use Certainty.

Neil Fraser: So, if you are offered three different value searches from Certainty, can you justify doing any but the most expensive one?

Victoria Mahon de Palacios: To protect ourselves and whoever takes out the grant, we should go for the most expensive one.

Simon Mitchell: It comes back to who your client is. If we are the executors, then we have to adopt a belt and braces approach. But before I got here this morning, I had an email from a client saying her husband had died last Monday. I did the wills and LPA for them in August and they have just come back registered. I am pretty confident that it is unlikely there is a will anywhere else, although I can't rule it out. So it's about taking a view on the degree of risk.

Clarissa Dann: How far do you go with the search?

Terence Bennett: The risk to us is probably greater where it is a new instruction from a client you have never had before. A firm like ours [Charles Russell Speechlys] has longstanding relationships with families that we have acted for through the generations, where the risk of there being an unknown will is be much lower, and I am sure it's the same for others of you here.

Neil Fraser: I remember one of Miles' cases where there was a will in March and then two on the same day the following November.

Miles Croally: Yes that was Bodh v Boudhi - a notorious case. One of the two wills made on the same day was upheld as valid even though one of the supposed witnesses to the other will gave evidence (which was accepted) that it was not his signature on the document.

Neil Fraser: I have seen instances where there have been two wills on the same day. Surely if you were going to rewrite the will later on you would destroy the first one?

Miles Croally: I can give an example of where a will search probably wasn't necessary. A successful businessman and his wife had a son and set up a series of protective trusts for him. When the businessman died, he left everything to his wife. She made a will, leaving money to the son's ex-wife and to his children, with the residue in further protective trusts.

Later, she made a codicil and signed two letters of wishes. This was all with the family solicitors who had acted for the family for decades. Shortly before the mother's death, the mother and the son went to a new firm of solicitors asking them to make a new will for her, leaving everything to him. The firm refused to act on these instructions on the grounds that they were significantly different from the content of the existing will, which had only been made two years before, and the new solicitor (rightly or wrongly) had concerns about undue influence and capacity.

After the mother died a will search was not considered necessary because it was very clear - and accepted by all parties - what the current will was which was valid at the time of death. The attempt to make a new will with the new firm of solicitors was an attempted attack on the existing will, which by implication was recognised as current and valid.

The administration process
 

Clarissa Dann: Let's move onto the administration process. In terms of the actual assets themselves, how do we find out what was all in this estate in the first place? What do you do?

Victoria Mahon de Palacios: At our firm we send out a checklist. This goes to the next of kin if the deceased is intestate, or to the executors, asking them for the types of information we need. So it's a matter of them collating all of the financial papers relating to the estate which they can find at the deceased's house, and bringing that into us and we go through it with a fine toothcomb.

Terence Bennett: Also going through their incomings and outgoings, looking through bank statements and cross-referencing to make sure all of the statements you've got are for accounts that are referenced. There are two reasons to make sure we've identified all of the assets and liabilities. One is so that the right people can receive the right distributions, and the other very importantly is inheritance tax reporting.

Matthew Duncan: Well that's things like going through seven years' worth of bank statements. Do you go through every bank account? Do you go through the cost of getting that, because most people now don't have statements, because they're all online.

It's those sorts of things. And HMRC will always marry up the IHT 400 with the income tax return, and they're very good at responding and saying: 'Has there been a drop in income, how has that come about?'

Simon Mitchell: It also depends on what we are actually being asked to do. Some clients say, 'I can't do the legal bit, but I can put the information together'. So we are being asked to collate the information they are presenting.
In this situation we are not the executors, they are. They are declaring all the information is correct. Yes,
we do mention to them that they could do an asset search but again, that is up to them.

Neil Fraser: Would it be appropriate to stand in front of a judge and say: 'This lay person asked me to do something, but this is as far as I went, and I did not do anything else or advise them of any other way?'

Simon Mitchell: Sometimes as lawyers, yes we have to do that.

Miles Croally: You can't force the client to give a comprehensive retainer nor can you act contrary to the client's instructions.

Simon Mitchell: There are three basic questions we ask: 1) who is my client, 2) what are my instructions and 3) what is my authority? You can start to act once you have got past those hurdles.

Neil Fraser: As someone who was completing paperwork on IHT 205 and 400 for a client, asking them how much assets there are - is that sufficient?

Simon Mitchell: Certainly in the context of the lady who contacted me this morning to tell me her husband has died, I have a notice on my file saying what all the assets are - we had a full discussion in the summer.

Neil Fraser: I think if you have got an existing client relationship, this is quite different when compared to a new instruction.

Miles Croally: You have to warn the client that there is a potential liability for penalties if they give the wrong information to HMRC.

Terence Bennett: If you look at the difference between the old IHT200 from ten years ago and the IHT 400 which has now replaced it, the IHT 400 is very much more specific.

Simon Mitchell: We recommend to clients that they redirect the post for a year, just in case something comes out of the woodwork. We had one case where we had disclosed everything to HMRC, paid the tax and got the clearance. And then out of the blue, we had an email from someone the son had never heard of saying that there was an investment worth £50,000 when the deceased died, but was now worth £100,000.

We went over all the files and were satisfied that we hadn't missed this asset. So I wrote an open letter to HMRC and explained the background, saying, 'Nobody knew about this asset, so here is a cheque for 40 per cent of its probate value, and if you have any queries let me know'. Apart from a small amount of interest that was due, they said it was 'case closed'. If you go to HMRC with open hands, they will usually be reasonable.

Identifying beneficiaries

Clarissa Dann: Now, onto the actual beneficiaries themselves and ensuring that they are who they say they are. I'd like to hear a bit more about how you carry out those checks.

Terence Bennett: I think that again, there are parts to this. One is making sure that the person who is saying, 'Oh thank you yes, send me the cheque, I'm Mr Bloggs', is in fact Mr Bloggs. And the other, particularly in intestacies, is making sure you've found all of the people who are entitled to be sent a cheque.

A couple of years ago, I dealt with an intestacy where the family members instructed us, (who were definitely the right family members to do so), but were convinced that there were only about five or six people who would inherit.

They said, 'No, no, no, she married, the husband predeceased, there were no children, no brothers, no sisters, and she was an only child'.

In the end, we discovered that there were 23 people entitled to benefit from the estate, with the genealogists who were instructed having to go back to someone who was born in 1865 (the deceased's grandfather) to trace the beneficiaries.

Neil Fraser: 23 is quite light when you compare it to others. I've done two distribution accounts this year, with more than 300 beneficiaries, at first cousin level. It's incredible the amount of family trees and scraps of paper that form the basis of what solicitors are prepared to distribute estates on, that turn out to be wrong.

Clarissa Dann: Really? That's quite damning. What do you lot think about that?

Neil Fraser: It's not the solicitor who has done the family tree, it's the family, generally.

Matthew Duncan: Sometimes we have to rely on this.

Neil Fraser: A third of them coming through our doors are incorrect.

Terence Bennett: In the end, someone would probably have to make a statutory declaration and say that the best search possible has been done.

Clarissa Dann: This is the thing, the whole compliance area. How do we know that someone is genuine?

Neil Fraser: And when you've got a family tree which has been prepared by a member of the family and you've got a list of addresses, how far do you go on proving those beneficiaries are who they say they are?

Whether they're linked through family or not, if they're named in a will, how do you prove that John Smith living at the address, is this the same John Smith who is named in the will?

Matthew Duncan: I have had DNA testing done for children, but it was by consent. It was to show the parentage, so that they could confirm conclusively that the deceased was their father. It was quite expensive to do, but it was done.

Neil Fraser: It's relatively cheap now to do a DNA test if you've got the correct linkage. It's very hard to check through females but if you've got male linkage then it's much easier and only costs around £200 or so.

But my personal view on DNA testing is that it should be used to inherit, but not to disinherit. So if man brought up a child his entire life, then is it fair for the child to find out the man was not their father after his death?

And have you ever tried to change the name on a utility bill? You don't have to do anything. You could phone up any of the utility companies and ask for another name to be put on your utility bill and they would do no checks. But everyone who checks ID wants a utility bill as a proof!

Matthew Duncan: For a proof of
address, yes.

Neil Fraser: It's a massive hole in the system.

Miles Croally: As an example of a case where DNA tests were relevant, I was involved in a case where the individual brought up as the son of a married couple had been in receipt of money and other benefits from a family trust. After the husband's (i.e. his supposed father's) death, he fell out with his mother and she alleged he was not in fact the son of her deceased husband but of a family friend as a result of an affair she had had. The trustees said they had to test the allegation, DNA tests were taken and it turned out he was the son of the family friend and not the husband. The son lost all continuing benefits under the trust (although he was not required to repay the value of benefits already received).

Neil Fraser: The moral is, don't fall out with your mother!

Engaging a specialist

Clarissa Dann: Right, onto this very interesting area of engaging a specialist.
At what point do you outsource some of the research or routine-related work?

Terence Bennett: It's not just costs, there are limits to our competences. We have to recognise that there are things that, no matter how much the client might say, 'No, no, no, don't outsource it, just do it', you know, we just can't. We cannot value houses and we are not genealogists,
so we have to know what we can and cannot do.

Neil Fraser: Solicitors tracing family trees happens all the time. You look on the estate accounts and there's a £350 charge for Ancestry UK. I think everyone is pretty much in agreement around here that there is a time when you have to outsource stuff?

Terence Bennett: Yes, absolutely. Turning to accountancy, there are a lot of probate practitioners and probate specialists who can do accounts and tax returns; they're trained to do that work. Other firms might not have such people, so it actually depends on what in-house expertise a firm has. I expect most of us here probably think the same, we've got a lot of relationships with a lot of people in different fields, and we'll match the specialist with the size of the estate, the nature of the client, someone the client will get on with. So, we'll not tie ourselves to one.

Simon Mitchell: It also depends to an extent on whether the deceased themselves had links to particular individuals or organisations. So if they had an accountant for example, you wouldn't say, 'We'll do all of the accountancy work'. You'd get the accountant to carry on with it. If they had a property abroad and they had notaries or whatever and there were contacts there that we could use, we would use them.

Neil Fraser: When it comes then to dealing with property, where do you go? For example, if you're the executor, your only interest is then to have that property maintained and sold. Do you have the time and resources for maintaining, managing and selling the property?

Terence Bennett: It depends if the property is to go to a beneficiary in specie, or if the estate is intended to be an estate that is divided up among many. So as a firm, we have a large private property team so we would use our contacts there.

Insurance

Clarissa Dann: We touched on insurance earlier a little bit. Can you just remind us how your firm uses insurance? Do you routinely take it or do you do it now and again?

Matthew Duncan: For me personally,
it's not routine yet but it is becoming more popular, we are looking at it more. Also, we're being targeted I guess, more by insurance companies who are selling these types of products.

Neil Fraser: Is this for will insurance or missing beneficiary insurance?

Matthew Duncan: Cover for missing beneficiaries or empty properties, all of those things, so there are companies now that approach lawyers more with these insurance products.

Clarissa Dann: So is the insurance sector a bit more innovative and coming up with new things?

Matthew Duncan: Yes, and I have had some good experiences. They tend to come from insurance companies that perhaps specialise in missing title insurance for properties, so they've got some good skills sets already and they're now becoming more specialists in estate administration.

Miles Croally: They tend to have limitations on the period of time that the cover is in force, how do you cope with that?

Matthew Duncan: Some of them do, some of them don't. They can only give insurance when you give them the facts so they don't necessarily always give you what you want.

Clarissa Dann: Has anyone made a claim, or tried to use a policy?

Neil Fraser: Well, I'm going to have to say yes on that because I'm in that business of finding people and reclaiming!

The most surprising claim I've had paid out was a year ago. It was a Jamaican estate where we were instructed to locate beneficiaries. We also were the executors of the intestacy with letters of administration. The family in Jamaica had insurance cover for missing beneficiaries and missing will, and a cousin came forward after we distributed a year later. She said she was a cousin and should have been paid.

By a statutory declaration, she had her birth certificate changed two years after the deceased had passed away, and had her father's name inserted into her birth certificate in Jamaica. This wouldn't have been allowed in the UK, and the insurance paid out on it.

So it was impossible to find her at the time because the father wasn't on the birth certificate. So she came forward and the insurance paid out.

Terence Bennett: That's interesting. It's good to know that they do pay out!

Looking ahead
 

Clarissa Dann: Would anybody like to share some conclusions, before we call it a wrap, about how you see the market, how you see all of the activity going forward?

Terence Bennett: There is a lot of contentious work out there.

Miles Croally: To a large extent, the increase in contentious work may be explained by developing social conditions. We now have a generation of people dying with property assets that have increased hugely in value where the next generation has found it more difficult to establish itself on the property ladder. In these circumstances, what happens to the parents' house can become very important to the children, so there can be, in certain cases, jockeying by the children (and, possibly, other people) to influence the succession to that property and, if someone is successful in monopolising succession and excluding one or more of the deceased's children, the excluded children often wish to resort to litigation.

Terence Bennett: At this point we have to remember that Ilott and Mitsonii is a key case, where an adult daughter who had been estranged for 26 years successfully claimed for provision out of the estate [under the Inheritance (Provision for Family and Dependents) Act 1975], which had been left to a number of charities. 

References

1. [2007] EWCA Civ 1019.
   See https://bit.ly/1Zbym41

2. [2015] EWCA CIV 797.
   See https://bit.ly/1VLPKXE

The estate administration roundtable was hosted by Fraser and Fraser and held at their offices in Hatton Gardens on 10 December 2015

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