IDENTIFYING THE BENEFICIARIES
If the estate meets the terms of the will (there are enough funds or items to cover all legacies) you can send a copy of the will to the beneficiaries, or arrange a reading of the will if desired.
It is advisable to list as soon as possible the potential beneficiaries of the estate. If a valid will has been left this will be as per the will, if not then the rules of intestacy should be followed.
You should list their names and addresses. In most cases this will be relatively easy but there may be cases where a beneficiary has been lost track of.
There may also be concerns as to whether a beneficiary has been declared bankrupt or a beneficiary might be under the age of 18 or lack capacity.
It is good practice to notify beneficiaries of their interest in an estate although they do not have any legal or equitable right in the estate until administration is complete and the personal representatives distribute the estate.
It can sometimes be difficult to locate a beneficiary. It might be possible to find information to assist with this in the deceased's papers or amongst other persons connected to the deceased.
If this is not the case the s27 notice ('see Creditors') can also alert you to unknown or lost beneficiaries.
Basic research into electoral roles, or phone books in the vicinity it is thought they might live, might find them or a relative. Use both married and maiden names for research into females that cannot be traced. There are also trace lines and professionals that can be used if it proves very difficult to locate them.
Beneficiaries have up to 12 years in which to start an action against personal representatives to recover their entitlement. It is therefore essential personal representatives protect themselves against this by doing all they can to trace them. The costs of such a search comes out of the residue of the estate but may be deducted from the share of the person to be traced.
If the beneficiary cannot be traced then the personal representatives should think about insuring against the risk, taking indemnities from the other beneficiaries or if necessary applying to the Courts for a Benjamin Order.
A Benjamin Order is a direction by the court where a beneficiary cannot be traced, it might specify that the beneficiary should be treated as pre-deceasing the deceased or they might require some monies to be set aside, it depends on the specifics of the case.
This is an expensive course of action and should be avoided if at all possible.
Distributions cannot be made to beneficiaries that have been declared bankrupt.
Payments due to them should be made to the trustee in bankruptcy.
If there is a risk that a beneficiary has been declared bankrupt then you should search:
which lists bankrupts and those that have been discharged in the last three months.
Similarly if distributions are due to a company you should check to ensure that it is not in administration or liquidation.
Publishing the s27 notice does not provide protection for the legal personal representative against making payments to a bankrupt. The Trustee in Bankruptcy can still take action against them so if in doubt a search should be done.
BENEFICIARIES WHO ARE MINORS
Unless specified in the will no one under the age of 18 may receive a capital bequest and an income bequest can only be received if the underage beneficiary is either married or in a civil partnership.
Therefore bequests to a minor will normally be held in trust until the beneficiary becomes of age; the alternative is for the personal representative to pay the amounts in to Court.
If a beneficiary has died but has children their share passes in equal shares to their children.
BENEFICIARIES AND TAX
Capital distributions are tax free for the beneficiary.
Income from the estate will be taxed on the beneficiary unless tax is deducted and paid by the estate.
Contact us for advice.
BENEFICIARIES THAT LACK CAPACITY
If a beneficiary lacks capacity and has either appointed an attorney themselves or has a deputy appointed by the Court of Protection any distribution should be made to the attorney or deputy and not to the individual themselves. Details of any attorney or deputy should be added to the Master Physical File.
CANNOT BE A WITNESS
Beneficiaries cannot be a witness to the will.
DEED OF VARIATION
It is possible to vary the terms of the Will or the Intestacy Provisions provided that all adversely affected beneficiaries are in agreement.
We have created a template Deed of Variation for this purpose. It can be amended to suit specific circumstances, please contact us if you are unsure how to amend to suit your situation.
HMRC have created an Instrument of Variation Checklist so you can be sure your Deed is legal and valid for IHT purposes.