Missing beneficiaries – what should a personal representative do?

We come across situations often where a personal representative has not been able to be distribute the assets in the manner that the deceased person intended to due to uncommon difficulties.

Intriguing journey in locating the estate

For nearly more than a year, our client and we have been navigating through various issues in relation to her late mother’s estate. Her late mother passed away intestate seven years ago leaving three biological adult children – two sons and one daughter, our client. Their mother’s death incidentally concluded sibling relationship amongst themselves with each child mistakenly believing that the other child benefited from the mother’s estate.

Early last year, our client sought advice as to whether she could ask for her entitlement in her mother’s estate, which she ‘mistakenly believed’ her siblings failed to give her. Our intriguing journey revealed that the significant asset in her mother’s estate was one house, which was possessed and sold by a government agency nearly six years ago for non-payment of rates and taxes.

The government agency deposited the purchase price minus the outstanding debt and enforcement costs as unclaimed monies with the relevant court. The unclaimed monies were held by the relevant court for the past six years with none of the children making any claim for the monies to distribute it amongst the beneficiaries of the estate.

Our client offered to initiate an application for grant of letters of administration by the Supreme Court WA, but it was essential to locate the other beneficiaries i.e. her other two siblings before adopting any further course of action. We were successful in establishing contact with one out of the two siblings, who consented for our client to apply to the Supreme Court for the grant of letters of administration to distribute the estate between the three children. The other sibling could not be located despite contacting family, friends and searching the electoral rolls.

This did not yield any success and our client instructed tracing agents to assist her locate her other sibling and had to consider numerous options on the best way to proceed.

Options to proceed

The following options were available to our client, as a personal representative, with each option having its risks and benefits:

1. The first option was to purchase a missing beneficiary indemnity insurance if the sum of money involved was modest. This option would have resulted in the administration of the estate being finalised with certainty that if the missing beneficiary subsequently emerges the insurance will pay his entitlement. The disadvantage of this option was the associated costs to the estate of purchasing such an insurance policy.

2. The second option was to keep the monies in a reserve fund to pay the missing beneficiary his share in the event that he emerges within the relevant limitation period. The disadvantage of this option was that the personal representative’s obligations will potentially continue for a number of years.

3. The third option was to seek indemnity from other beneficiaries. This translates into paying the missing beneficiaries’ share to the other beneficiaries, and if the missing beneficiary subsequently emerges then having them pay his/her entitlement in the estate. This was one of the least desirable option as any personal representative, including our client will ultimately be liable to repay the sum personally if the other beneficiaries are unable or unwilling to pay.

4. The fourth option was to obtain a ‘Benjamin order’. This is an application to the court requesting permission to distribute the estate on the basis of a factual version of events (i.e. the missing beneficiary has probably died). If the events are subsequently revealed to be incorrect (i.e. the missing beneficiary subsequently emerges) then the personal representative will be protected from liability. Nevertheless, the other beneficiaries may still be liable to pay the additional sums that they have received from the missing beneficiaries’ entitlement. Subject to the amount of the legacy, the legal costs of making the application can be quite significant as the court will require the personal representative to satisfy the court that they have undertaken all reasonable enquiries to establish the position.

5. The final option was to pay the funds due to the missing beneficiary into the court. This was the least attractive option as it would mean that the sums otherwise due to the missing beneficiary remain unavailable to the other beneficiaries.

6. The facts of any particular case ultimately determine which of the above options is the most prudent.

Our client’s personal and financial circumstances and her relationship with other siblings warranted that she opts for the least attractive option of paying the missing beneficiary’s entitled in court and distribute the balance estate between her one brother and herself.

Takeaway messages

From a testator’s (a person making a will) perspective confirming the contact details of beneficiaries in a will periodically, potentially saves their personal representatives(s) the time and expense of having to consider the options above.

From a personal representative’s perspective, a decision to exercise any of the options above must be made after considering your personal and financial circumstances and your relationship(s) with the beneficiaries to the estate.

 Please note that any information included in this article is general information only and does not constitute legal advice. Please contact us to discuss your particular circumstances.