The duties and responsibilities of an executor/estate trustee of an estate are vast. It is not a job to take lightly. One of the duties of an executor is to determine which relatives are to benefit from an estate in situations where the deceased did not do a will (an intestacy), or where the deceased may have done a will, but, in doing so, he or she did not dispose of all of their property, thus giving rise to a partial intestacy.1 Provincial intestacy rules govern in situations such as these, and set out a hierarchy of which members of the deceased’s family are entitled to receive the intestate assets. If an intestacy exists, it is incumbent upon the executor/estate trustee to locate all of the beneficiaries, even if unknown to the family. Consequently, the executor/estate trustee may need to retain a genealogist firm to conduct an heirs search.
A recent article in the Society of Trust and Estate Practitioners (STEP) Journal, “STEP Briefing Note: Personal Representatives and Trustees – Genealogists fees,” 2 dealt with an important issue that arises in situations giving rise to the necessity of obtaining an heirs search: that being, the cost. As we learn from that article, there is not only a cost of obtaining a search, but there is also a legal cost of not performing one as well.
The article provides a summary of the three main fee options available to an executor/estate trustee, those being: the “Fixed Fee” option, the time-based option, or beneficiary contingency fees. The implications of these options are noted. The “Fixed Fee” option and the time-based options are somewhat self-explanatory and, for the most part, are the more conservative routes.
Beneficiary contingency fee arrangements are more controversial. The way they work is that the genealogist firm will undertake the research necessary to locate a missing heir and then enter into an agreement with the newly-located beneficiary whereby the beneficiary will agree to pay the firm a percentage of their entitlement once the estate is distributed. One of the major drawbacks of this type of heirs search is the fact that, in some cases, and particularly in situations where the estate is large, the percentage requested by the firm is not commensurate with the work performed by the firm, thus making the fee less justifiable from a beneficiary’s perspective and, therefore, more susceptible to challenge.
As noted in the STEP article, an executor/estate trustee, “would need to be confident that a contingency fee was likely to be less expensive than a fixed or time-based fee structure” and, generally-speaking, “should not enter into any agreement which deducts fees from one or more beneficiary’s individual share rather than the residue as a whole without careful consideration.”
While an executor/estate trustee may expose themselves to liability by failing to choose the most reasonable and economical route to locate missing heirs, there is also the risk of failing to make the necessary investigations. Should an executor/estate trustee fail to conduct an heirs search and locate all of the beneficiaries, he or she may be liable to them at a later date for incorrectly disposing of the estate assets.
As such, and as noted, executors/estate trustees must carefully consider the fee options available to them in situations where an heirs search is necessary in order to minimize their vulnerability to claims by disgruntled beneficiaries.
For a more in depth analysis of this issue, click here to link to the STEP article online
Therein, readers can also find helpful links to further articles on this topic.
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1. Notably, pursuant to section 1 of the Crown Administration of Estates Act, R.S.O. 1990, c. C.47, in situations where there is no potential executor of an intestate estate, the Superior Court of Justice, on application by the Public Guardian Trustee (PGT), may grant to the PGT letters probate in accordance with that Act. And, pursuant to section 2.1(2), the PGT is authorized to: (1) identify and locate persons who may have an interest in the estate as well as other persons, but only for the purpose of locating persons who may have an interest in the estate; and (2) identify the estate’s assets.
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