Finding missing beneficiaries

This article appears in the March 2022 issue of Advisor’s Edge magazine. Subscribe to the print edition, read the digital edition or read the articles online.

Executors have a duty to notify beneficiaries of their entitlement under an estate, but what happens if a beneficiary can’t be easily identified or found? An executor who distributes property from an estate without making reasonable efforts to find a missing beneficiary may be held personally liable if the beneficiary turns up later seeking their share.

Matthew Urback, partner with Shibley Righton LLP in Toronto, said there’s “not a ton of guidance” in estate law on how far an executor has to go in order to find a beneficiary.

Instead, executors must rely on case law to determine what a court would deem a reasonable effort to identify or find a missing beneficiary, with the size of the estate or gift under the will being a key consideration, Urback said.

The good news is that “it’s a lot easier now” with the rise of social media and genealogical sites to identify and find beneficiaries, said Monique Charlebois, an estate lawyer in private practice in Oakville, Ont., and a former senior estates counsel with the Office of the Public Guardian and Trustee in Ontario.

However, conducting a proper search still requires time, effort and expense. “There is a cost to locating people,” said Jandy John, director of estates and trust with Wyth Trust in Toronto.

Urback added: “If you’re trying to prove if someone does or does not exist, there are practical problems with that.”

Reasonable inquiries

Where someone dies intestate (without a will) and without any immediate family, degree-of-kinship rules in provincial estate legislation determine which relative or relatives would inherit estate property. However, identifying and locating the next of kin can be a complex task, particularly if the deceased’s relatives live outside Canada.

“It’s often difficult to source out beneficiaries in other countries,” said Kim Whaley, estate lawyer and founding partner at WEL Partners in Toronto. “An [executor] would have to retain counsel in the foreign jurisdiction or go to a consulate and make every attempt to try to find the person.” Executors also need to be wary of people making fraudulent claims of kinship to the deceased, Whaley said.

In an intestacy, executors need to consider whether the deceased may have had children they didn’t recognize or claim, but who might nonetheless inherit. In Ontario, for example, the Estates Administration Act charges executors with making “reasonable inquiries for persons who may be entitled by virtue of a relationship traced through a birth outside marriage.” Executors should follow up on credible leads that emerge after speaking with the deceased’s family and searching through their personal effects, estate lawyers said.

Under the act, an executor won’t be held liable when an unknown child of the deceased turns up after an estate’s distribution if the executor made reasonable inquiries and if a search of parentage records with the province’s register general failed to reveal the existence of such a child.

A similar duty to make reasonable inquiries about unrecognized children may also arise in an estate with a will that directs the executor to distribute property to the deceased’s “issue” — their children, grandchildren, et cetera — as a class of beneficiaries, rather than to named people.

Sometimes a will includes a gift to a person unknown to the deceased’s family or to the executor, Urback said, a problem that tends to come up most often in wills drafted decades ago and never updated. If a search reveals the named beneficiary is dead, and the will includes directions as to who else should receive the gift, the gift will go to that beneficiary. If the will does not contain any direction, the gift will be distributed under the rules of intestacy or the executor may seek direction from a court.

Documenting the search

Sometimes a beneficiary can be identified but not found. For example, someone may have become estranged from the deceased’s family and cut off contact years ago. In other cases, a person may have disappeared in perilous circumstances and it’s uncertain whether they’re still alive.

Whether executors are trying to identify beneficiaries or locate them, they should document their efforts, estate experts said. They will need to speak with the deceased’s family and friends; go through their letters, photos and other personal documents; search through social media and other digital accounts; and review publicly available records, as appropriate.

Executors looking for missing beneficiaries should consider advertising on online platforms that specialize in publishing notices to beneficiaries and creditors. An ad placed in a newspaper is considered a less effective way to search for a beneficiary today, but may still work in certain circumstances. Placing an ad could also help strengthen an executor’s case to a court that they took all reasonable steps, Whaley said.

If an executor’s own efforts are unsuccessful, and the size of the estate or gift justifies the cost, executors should consider hiring third-party researchers, such as genealogists, private investigators or skip-tracing firms. Executors should do as much legwork as possible before hiring a third-party researcher, John said, to give them a place to start and to keep expenses in check.

In recent years, executors and families have even retained a DNA sample from the deceased before burial or cremation to determine heirs or to protect the estate from fraudulent kinship claims.

“The best insurance is to obtain a DNA sample prior to the disposal of the remains,” said Charlebois, who witnessed people taking such measures when she worked at the Office of the Public Guardian and Trustee. “That deals with intestacies and family classes — you get a DNA profile and you save it.”

Avoiding liability

After an executor has exhausted all reasonable efforts at identifying or locating a missing beneficiary, they may take one of several options.

The executor may apply to court for an order to have the missing beneficiary declared legally dead. However, a high bar must be met for the court to grant the order. An application can be made to declare the beneficiary an absentee, in which case a committee holds the missing beneficiary’s share on their behalf while a search continues.

Another option is for the executor to apply for a so-called Benjamin Order, named after a key precedent case. The order would allow for the estate to be distributed as if the missing beneficiary had predeceased the testator — but isn’t a declaration of death. Should the missing beneficiary turn up later, they could pursue other beneficiaries for their share if the money is still available, but the executor would not be liable.

The executor could also apply for the advice and direction of the court, and protection from liability, to distribute property from the estate. The executor would have to swear an affidavit that they made all reasonable efforts to identify or find the missing beneficiary and show evidence to the court. The missing beneficiary’s share would then be paid into the court accountant to be held and managed on their behalf should they turn up later.

“No residual liability remains on the executor, because they’ve done all they could,” Whaley said.