The Taylor&Emmet Blog

Missing beneficiary insurance: The threat it posed to families with long-lost relatives

This year marks the 20th anniversary of a court case that challenged the validity of missing beneficiary insurance as an administration expense of a deceased’s estate. This month, Ben Brown explains the threat it posed to families with long-lost relatives…

In 1999, the case of Evans v Westcombe was big news in the world of probate law, although people outside the legal profession may not be familiar with its impact on missing beneficiary insurance policies.

In brief, it involved an estate that was being dealt with under the intestacy rules. The deceased had a son and daughter who were each entitled to a 50% share of all assets. The daughter was appointed administrator of the estate and because she hadn’t seen her brother for 30 years, she took out a missing beneficiary indemnity policy, so she could bring the matter to a close.

Some years later, the son reappeared and made a claim against his sister, which included asserting that the cost of the insurance policy shouldn’t have been paid by the estate as an administration expense.

Thankfully, the judge supported the use of such policies as a pragmatic solution to the issue of missing beneficiaries, instead of insisting on more expensive and onerous applications to court. It was also confirmed that the associated costs are a reasonable administration expense that can be settled by the deceased’s estate.

What should I do if I find myself in a similar situation and cannot trace a beneficiary?

If you are faced with this problem, it is sensible to engage a genealogist or tracing agent. They have very high success rates and can usually locate a missing beneficiary. Indeed, it is very rare they cannot be found.

However, should you find yourself in this unfortunate situation, you have, broadly speaking, five possible options. They are:

  1. Retain the beneficiary’s share: This is not usually recommended and certainly not for large estates, as you would remain responsible for the retained money long after the rest had been distributed and at least until the 12-year limitation period expires.
  2. Obtain an indemnity from the known beneficiaries: In this case, the estate can be distributed to the known beneficiaries on the premise they will protect the administrator against further claims. This is a risky option as you may not be able to rely on the indemnity should the missing person reappear.
  3. Apply to court: In large or complex cases, you can ask the court to provide direction. You may be granted what is known as a ‘Benjamin Order’ after a notable case in 1902, which allows the estate to be distributed on the basis the missing beneficiary died before the deceased. It protects you against any personal liability should they reappear, but can be time-consuming and expensive.
  4. Pay the money into court: You could consider paying the money due to the missing beneficiary into court, under rules set out in the Trustee Act 1925. However, this isn’t always straightforward and is usually a last resort.
  5. Missing beneficiary indemnity insurance: Despite the case outlined earlier, this remains the simplest and most cost-effective solution – you will have to provide evidence that searches have been undertaken to locate the beneficiary. The policy allows you to distribute the full estate and if the missing person is ever found, the insurer would settle their entitlement under the terms of the policy.

In the majority of cases, insurance may well be the best option. I would always recommend the use of such policies in intestacy cases, even when all beneficiaries appear to be known. (Often referred to as ‘comfort cover’ or an ‘unknown risk’ policy.)

Taylor&Emmet has extensive experience in dealing with issues relating to missing beneficiaries and has a number of partners who can provide effective solutions. If you need help tracing a long-lost relative, don’t hesitate to give me a call on (0114) 218 4000 or email: ben.brown@tayloremmet.co.uk

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