STEP Briefing Note: Personal Representatives and Trustees - Genealogists fees

This STEP Briefing Note sets out some issues to consider when a personal representative (PR) hires a genealogist to find heirs.  If you are acting as a PR of a deceased person you will be personally liable to the true beneficiaries in the event of an incorrect distribution of the estate.  Therefore it is your duty to take reasonable steps to find all those who are entitled and it may be necessary to employ a genealogical research firm to achieve this. 

It is the responsibility of a PR to select the most suitable research approach to employ.  A number of commercial firms offer this service and there is a range of fee options currently available. Search costs are commonly a general estate expense however, there are circumstances when this will not be the case, and PRs must also consider whether it is more appropriate to pay the costs of research from the entire estate or whether such costs should be deducted from any specific heirs’ portion particularly if there are undiscovered heirs.

It is good practice to obtain a range of quotes from genealogists and you should be fully aware of the different options available including time-based, contingency or fixed fee options. 

A summary of fee options and their implications follows:

The “Fixed Fee” option

Fixed fee options are set fees agreed in advance and in some cases may be payable only if a pre-determined goal is achieved.  This may be to find the heirs, verify an existing family tree or to prove negatives.  Such fees may be refundable if the goal is not achieved.  Fixed fees are normally payable within a short period of receiving the report from the genealogist.

The benefit of fixed fees is that PR’s are aware of the cost of the work in advance regardless of the actual time taken.  The disadvantage is that the genealogist may not be able to complete the work for the agreed fee, although this can be mitigated by agreeing that a refund will be made if this occurs. Alternatively the work may turn out to be less than expected but the fee may not be reduced.

Time-based fees

Time-based fees are charged according to the actual time spent, normally on a per hour basis, which is recorded and billed. In addition, out-of-pocket expenses incurred in providing the service, including copies of any certificates, Wills and Grants required, may be charged.  The benefit of such an approach is that the cost is consistent with the time spent.  The disadvantage is that the fee will increase as the work escalates and it may be unclear when the genealogist is originally commissioned how much time will need to be spent. Particularly in relation to smaller estates a PR will have to balance uncertain cost against the amount a beneficiary may receive.

Beneficiary contingency fees

Under beneficiary contingency fee agreements, once the genealogists have undertaken the research, they come to an agreement with each beneficiary they identify whereby the beneficiary agrees that the genealogist is to be paid a share of their entitlement when the estate is distributed.

The advantage is that known relatives of the deceased do not directly suffer the expense of tracing relatives that have lost touch with the family.  As the fee is a percentage of the assets distributed to unknown relatives the costs will not directly impact upon known relatives. The share of an estate that passes to known relatives may reduce depending upon the success of the genealogists, particularly if there are many lost relatives. 

The disadvantage of this approach is that, particularly in the case of large value estates, the fee may be not be proportionate to the effort that was required.  Moreover, there may be difficulties if a PR has instructed researchers without the involvement of all known beneficiaries. 

A PR would need to be confident that a contingency fee was likely to be less expensive than a fixed or time-based fee structure.  Generally PRs 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.

The appropriateness of the contingent charging structure is not accepted by some commentators and there has been much comment on the contingent fee basis in both the professional and general press. It would be good practice to familiarise yourself with the legal arguments for and against such fees in order to protect yourself from any possible claim.

Conclusion

The PR should be satisfied that any charges agreed with the chosen research organisation are clear, represent good value for money and are appropriate to the circumstances of the particular estate. 

Further reading

Some articles which have been published on the issue of Contingency fees include:

Contingency fees: Lawful, Charles Fraser TEP, STEP Journal November-December 2009 (see also http://www.stepjournal.org/default.aspx?page=1648)

Contingency fees: Unlawful, Constance McDonnell TEP, STEP Journal November-December 2009 (see also http://www.stepjournal.org/default.aspx?page=1654)