A timely warning – When administering an estate can result in a financial loss.
A personal representative of an estate has various responsibilities. If the will names the person or entity who is to deal with the estate that person or entity is referred to as the executor. If there is no will the person or entity who deals with the estate is referred to as the administrator.
One of the responsibilities of the administrator is to establish who the beneficiaries are and to distribute the estate to those beneficiaries. Taking on the role of the administrator can prove expensive as demonstrated by the following example.
Mr Jones was contacted by a firm of ‘heir hunters’ who informed him that he might be entitled to receive an inheritance from a distant relative. To find out the details of the inheritance Mr Jones agreed to sign the legal contract supplied by the heir hunters and to pay their fees. In this case Mr Jones appeared to be the sole beneficiary and he agreed to be the administrator.
The value of the estate turned out to be £80,000 and the heir hunters’ fees were 25% plus VAT (£80,000 x 25% being £20,000 plus £4,000 VAT) being £24,000 which meant that Mr Jones received a net amount of £56,000 after paying the heir hunters’ fees.
Some months later Mr Jones was contacted and informed that there were other relatives of the deceased who were still alive and they had a preferential claim on the estate. These other relatives were entitled to receive the estate value of £80,000 and Mr Jones was left out of pocket to the value of £24,000.
With hindsight, Mr Jones could have taken out missing beneficiary indemnity insurance. This is usually obtained by making a one-off premium payment from the estate.
Article from ACCA In Practice