Opinion poll reveals major concerns over heir hunter fees
An independent poll commissioned by Title Research reveals significant public concern about the high level of percentage fees being charged by many probate research firms. Title Research is looking to the Law Society, Society of Trust and Estate Practitioners and the Institute of Legal Executives to advise probate practitioners to take a best practice approach when using heir locators, to ensure beneficiaries are charged fairly.
It is estimated that ‘heir hunter’ firms are taking millions of pounds out of British inheritance pots each year, through unfair and excessive percentage fees, also known as ‘contingency fees’, which sees relatives sign away as much as a third of their entitlement just for being found. It is estimated that the combined turnover of firms charging percentage fees could be as much as £10 million. Based on the Opinium report, the average inheritance was found to be £67,500 and where beneficiaries have paid a percentage fee, the average percentage paid was 20% of their entitlement. Title Research does not charge percentage fees for any case and instead charges a fee based on a fair reflection of the amount of time/effort/skills needed to locate beneficiaries. Such fees are agreed in advance with the probate practitioner handling the estate. The fee agreed is often a fixed fee. On average Title Research fees equate to a cost per beneficiary of £420, (although this fee is always paid from the estate as a whole, rather than by the individual beneficiary).
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The poll was undertaken by the market research company, Opinium, amongst 2,161 members of the general public, 104 ‘missing beneficiaries’ and 315 ‘known beneficiaries’. The market research reveals that almost two thirds (64%) of the British public believe that paying a fee of 25% to heir locators is unfair, and 76% believe there should be a cap on any percentage fee charged.
Similar concerns were expressed in the survey by missing beneficiaries, 67% of whom believe a percentage fee of 25% to locate a beneficiary is unfair. The survey also polled ‘known’ beneficiaries who did not need to be found before they became aware of their inheritance. Around half a million people benefit from an inheritance every year in this way. 65% of these ‘known’ beneficiaries believe a percentage fee of 25% is unfair.
Around 60,000 people each year discover that they are ‘missing beneficiaries’ – people who are in line for an inheritance from a relative that they were either unaware of, or had lost touch with. Around two thirds of people in Britain die without making a will, so in today’s modern age of transient living and disparate families approximately 17,500 of these missing beneficiaries have to be found by probate genealogists, also referred to as ‘heir locators’ or ‘heir hunters’.
The survey also discovered that as many as 40% of those people who were found by heir hunters and had to pay a fee, felt under pressure to pay; perhaps more understandable when considering these firms will often withhold the name and details of the deceased person (Title Research never withholds the name of the relative who has died from heirs) and the value of the inheritance, until the beneficiary agrees to pay the fee. 59% of people questioned believe that this way of working is unfair, especially as unlike most financial agreements, beneficiaries are offered no cooling off period by many heir locators and as the industry is unregulated, people are left with nowhere to go if they believe they have been overcharged or treated unfairly.
Constance McDonnell, a barrister specialising in probate law, comments:
“Heir locators who use ‘contingency fee’ agreements often conceal from the beneficiary the facts which would give the beneficiary the choice of tracing the inheritance himself and by-passing the heir-locator. This approach encourages misrepresentation to induce a beneficiary to sign away a percentage of their entitlement. It is important to seek independent legal advice based on each case, but if misrepresentation has taken place, in my opinion these fee agreements may well be considered unlawful.”
Tom Curran, Chief Executive of Title Research comments:
“Many missing beneficiaries are under the impression that they should have to give up a significant proportion of their windfall for the perceived work that has gone in to finding them. However our view is that the cost of locating missing heirs should fairly reflect the amount of research involved and not be calculated as a proportion of the estate.”
This view is echoed by over half of the respondents in the Title Research study, with 58% saying that they believe a fixed cost for finding missing beneficiaries is the fairest method of charging, compared to just 13% who believe percentage fees (also known as contingency fees) are the fairest method. Unlike contingency fees, the cost of locating missing beneficiaries on a fixed fee basis is paid by the estate as a whole (as with all other professional probate fees) meaning that all beneficiaries will receive 100% of their entitlement, rather than a reduced amount.
Beneficiaries should have an independent body to which they can take complaints if they feel they have been overcharged or treated unfairly by heir locators, in the same way they do for other financial complaints. We hope the Law Society, the Society of Trust & Estate Practitioners and the Institute of Legal Executives will advise probate practitioners to take a best practice approach when using heir locators, to ensure beneficiaries are charged fairly. We want to engage with these organisations to hear their view on how best to reach a solution to this problem. We are also talking to parliamentarians to bring about this change and we are calling on those companies who choose to charge such excessive fees, to clean up their act.
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