Finding Missing Heirs: Put Yourself in Their Shoes
Have you ever wondered what would happen if your name turned up on a “missing heir” list in some trust officer’s or attorney’s office? Would they be able to find you? How would they do that? Would it cost you money to become a beneficiary? Maybe they would never find you. What then?
These are the types of questions often asked because people hear of others who may have received an unexpected inheritance from a distant relative. Wouldn’t we all like to be in that position someday? The extra money would come in handy, wouldn’t it?
Some of that excitement, however, could be dampened when people learn that the costs associated with beneficiary searches are often deducted from the missing heir’s inheritance. These costs can run into thousands of dollars. Therefore, legal and trust professionals must exercise their fiduciary responsibility in carrying out such searches. They must protect the integrity of the estates in question and consider the interests of the missing heirs before expending funds on the search.
If search efforts conducted by you, the trust officer or attorney, prove unsuccessful, you may call upon the services of an outside tracing firm for assistance. Here is where you have to consider the missing heir and step into the missing heir’s shoes. Identifying and selecting a firm, evaluating its search proposal, and justifying the cost and payment systems are all part of your responsibility as a trust officer or estate attorney.
Each year, many thousands of people die without having made the provision of executing their formal Last Will and Testament. Consequently, court proceedings will necessarily include a determination of heirship. Trusts may lapse with funds reverting to persons under the general rules of inheritance. Funds may escheat needlessly, leaving rightful heirs without benefit. Though it is not a common occurrence, every trust officer and probate attorney will, from time to time, come across the problem of lost or unknown heirs.
When it comes to locating missing heirs, nothing can be more challenging or more rewarding. Most people enjoy a good mystery, and searching for missing heirs can certainly be exciting. Time and resources permitting, missing heirs can virtually always be found.
Heir Tracing Is International in Scope
Though it is not commonly known, a worldwide heir tracing business exists. The industry is comprised of individual heir tracers and genealogical search firms providing professional search services in various forms and with different fee structures. Their purpose is meeting the needs of probate attorneys and trust officers in locating missing heirs and beneficiaries.
As the population increases, it becomes more and more common for family members to move from region to region, whether to take up new employment or for other reasons. Divorce is also more prevalent today than in the past, and society generally holds more liberal attitudes toward childbirth born out of wedlock. The result is often more estrangement among family members.
For these reasons, locating heirs now requires specialized skills and access to the public and private records necessary for research. Consequently, many trust officers and attorneys must turn to professionals for assistance when their own efforts fail.
Two Types of Search Firms
Outside professional sources fall into two main categories: percentage-based search firms, whose fees are negotiated with the heirs after they are found, and non-percentage-based firms, whose fees are quoted in advance and authorized by the estate.
Often, the valuable time you spend unsuccessfully attempting to locate a person may exceed the cost of an outside firm’s successful search. This is particularly true if you have contracted with a firm that guarantees a successful result or no charge. Any time spent unsuccessfully is the firm’s own risk, not chargeable under the terms of your agreement should the search fail.
Percentage-Based Search Firms Charge up to 50 Percent as a Finder’s Fee
Many individuals and firms exist who will agree to involve themselves in your search, with their compensation arranged between themselves and the missing heirs after they have completed their search. This method of payment is sometimes referred to in their advertising as “no fee to the estate.” The percentage approach to locating missing heirs is the most common one you will encounter when dealing with outside sources.
In some circumstances, a percentage-based heir search firm may begin its search to “get there first” without the prior knowledge of the trust institution or estate attorney. Once the heirs are located, negotiated fees vary, usually ranging between 20 and 50 percent of the person’s inheritance. This method of compensation and involvement is not without controversy.
Many attorneys and trust officers believe that withholding information concerning the inheritance from the heir until after a contract with the heir is signed puts the heir at a distinct disadvantage. It can be argued that the missing heir would not otherwise know of the inheritance except for the efforts of the search firm. However, it can also be argued that a percentage fee on a large estate could be excessive, especially if the search firm had the expertise to locate the heir easily and with minimal expense. For example, a 33 percent share ($50,000) of a $150,000 estate may be excessive.
Some states regulate the maximum percentage allowed to be charged and, in certain circumstances, can alter agreements signed by uninformed heirs. You should exercise your own judgment when deciding whether this type of contractual arrangement meets your needs.
Because the fees available for percentage-based firms can be substantial, the stakes are high. The greater the size of the estate, the more aggressive and competitive these firms may be to negotiate an agreement with the missing heirs.
By the same token, smaller estate matters may not receive the same level of interest from percentage-based search firms because the rewards are not as high. In other words, smaller estates do not generally get the same attention that the large estates receive.
A Word of Caution
In initial discussions with an heir search firm, whether percentage-based or non-percentage-based, you may choose to withhold identifying information concerning the estate name and persons sought. Such a precaution can eliminate the possibility of an unethical individual starting a search without your knowledge or approval.
How Non-Percentage-Based Firms Operate
Not all search firms determine their fees on a percentage basis. Some firms, though they are in the minority, base their fees on a schedule of charges predicated upon the nature of the search required and the information available, not the size of the trust or estate. This type of firm can often be engaged without a retainer, and some may guarantee a successful result, or there is no charge.
Non-percentage type firms do not initiate their search without your knowledge and written authorization. Usually, they will recommend that you seek court approval of their search proposal. Their fees are paid by the estate from the share due to the persons sought after the search is completed. A non-percentage-based firm’s fee is not affected by
the size of the estate, so its charges are increasingly favorable as the value of the trust or estate increases.
For example, if a firm’s fee is $1,500 to locate a person whose inheritance was only $3,000, its fee would be equal to 50 percent. On the other hand, if the person’s inheritance was $150,000, the $1,500 fee would only be 1 percent of that amount.
Because the fees are quoted in advance, you can judge for yourself the cost/benefit ratio of the proposal in comparison to other proposals you may have requested.
The relevance of an outside search firm’s fees is best considered from the missing heir’s standpoint. Simply stated, the more reasonable the cost of the search, the greater the inheritance that remains for the heir.
When faced with the fiduciary responsibility of engaging an outside source to locate missing heirs, you must think in terms of justifying the search
firm’s fees to the missing heir. Choosing a firm involves understanding the marketplace and making an informed decision as to the fee methodology that best meets your needs.
What Outside Firms Should Provide
Regardless of which type of outside firm or individual you select, the result of their efforts should be the same. You should expect to receive a detailed written report that provides clear and convincing evidence of the identities and location of all concerned parties. All relevant documentation, including records of birth, death, marriage, divorce, census, and the like, should be provided within the report. The report should also be presented in an easily understood manner should you need to enter it as an exhibit in court proceedings. In addition to furnishing a clear, well-organized report, the firm should be qualified and willing to provide expert witness testimony.
Typically you should expect complex searches in the United States to take from 3 to 6months to complete, although the more straightforward searches will take less time. Searches elsewhere in the world may take longer due to language barriers and communication delays.
You may require the authority of the court to hire a search firm. Generally speaking, the courts look more favorably on an agreement with an heir search firm if the cost of the search is known in advance. The court order should reflect the exact nature of the search to be undertaken and explicitly describe the fees and payment provisions. Most court
orders allow for the costs of the search to be levied against the shares of missing heirs who are located.
These are some of the main factors to consider when locating missing heirs. A variety of methods are available to the attorney or trust institution, and they should each be evaluated before initiating a search that could turn out to be complex or costly. Your best approach is to temporarily put yourself in the heir’s shoes and make the kind of decision a missing heir would make if given the opportunity. Time, expertise, and the associated costs must all be weighed as part of the fiduciary responsibility you have to the estate.
If you still need help with selecting an heir search firm or locating a missing heir, get in touch with us for a no-cost, no-obligation consultation now.
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