Probate lawyers face tough challenges ahead

Probate lawyers may find themselves in the line of fire as plunging stocks and shares devastate the value of estates, prompting beneficiaries to take a hard look at their role in protecting those assets.

Beneficiaries are increasingly prepared to take their battles to court – last year saw a three-fold increase in High Court disputes over wills and inheritance because of increasingly complicated family structures, larger estates, more charity bequests and challenges over the will-maker’s mental capacity.

Now practitioners are warning that solicitors may find themselves blamed for losses caused by the economic collapse if they have not acted promptly in administering an estate.

Peter Steer, head of the charities department at Salisbury-based Wilsons, says: ‘In the boom times, rising stock market values meant there wasn’t a problem if executors delayed in obtaining a grant of probate and selling shares because it worked to the beneficiaries’ advantage.

‘I am now receiving a number of instructions from charities and other beneficiaries where solicitor executors have sat on their hands and, low and behold, the share portfolio of the deceased has tumbled in value.’

This has prompted Wilsons to review the liability issues. ‘It is a complex area and the law is rather arcane,’ Steer says. ‘It tends to favour executors – and judges have been pretty lenient in the past.

‘However, we take the view that, in the modern environment, where executors are paid substantial sums to administer an estate, they ought to be pinned with liability where they have done nothing to safeguard assets that are dropping in value like a stone.’

Steer says Wilsons has cases where executors have not acted as promptly as beneficiaries wanted.

‘My sceptical view is that, while there are a large number of good probate practitioners, there is an even larger group of fairly average ones who keep beneficiaries in a vacuum until it suits the executor to tell them what is going on.

‘While there is a lacuna in the law which favours dilatory executors, I wouldn’t be surprised if a case arises soon which will be a springboard to make the position clearer or, indeed, change the law.’

Patricia Wass, chair of the Law Society’s probate section and a partner in south-west law firm Foot Anstey’s private client team, says practitioners need to protect themselves. ‘While no one could have foreseen the complete collapse in the market, I suspect people will get on the gravy train and start suing, so you need to make sure you have revisited investment objectives and taken advice from professional advisers and met all your obligations.’

Andrew East is an Institute of Legal Executives (ILEX) fellow and an associate at Prettys, which has offices in Ipswich and Chelmsford. A former chair of STEP’s UK Probate & Estates Committee, East has also been looking at the liabilities involved in the role of executors, trustees and certificate providers for lasting powers of attorney (LPAs).

‘Being a trustee and an executor comes with the territory of being a private client practitioner,’ he says, ‘even though, when you look at it logically, everything is screaming at you "don’t do it". I square the circle by telling myself life is not without risk.’

East adds: ‘People are far more litigious now. There is also a growing blame culture. My feeling is that this will all be aggravated by the economic situation, so practitioners must get the best possible advice and make sure it is well documented and reviewed. You need to be on your toes as an executor because if you take months to get probate, the investment portfolio is left very exposed.’

Wills and inheritance are certainly proving increasingly contentious. Research by London law firm Wedlake Bell found 228 disputes were dealt with by the High Court last year, compared with only 83 in 2006. And that is probably the tip of the iceberg, according to Fay Copeland, a solicitor in the firm’s private client team – the actual number of legal disputes is likely to be far higher because the vast majority settle.

Another consequence of the downturn may be a growth in insolvent estates. A survey of 2,000 people by Minster Law Solicitors, which has offices in York and Wakefield, found two-thirds were worried about inheriting debts.

Wass at Foot Anstey says practitioners should be ‘mugging up’ on the rules and regulations governing the distribution of insolvent estates in case they become an issue in the next few years.

But the recession also creates opportunities for private client work, as it is a good time to restructure portfolios. ‘We are perceived at the moment as being a "distressed purchase", with people only coming to us if they have to rather than because they want to. But we have to get the message across that it is not all bad news.’

East agrees: ‘The irony is that there has never been a better time to restructure personal affairs and assets when their value is falling and capital gains tax is only 18%.’

The downturn has also prompted an increase in instructions for offshore lawyers from wealthy clients who have built up assets in various jurisdictions.

Anne Hembry, probate and estates manager with Jersey law firm Voisin, says they are dealing with more complex cross-border estates. ‘It is not always appreciated that Jersey is not part of the UK and we have dealt with wills which have restricted the distribution of assets to those in the UK, resulting in the Jersey assets having to be dealt with under the rules of intestacy.’

Though probate as a practice area is more recession-proof than property or corporate, Sarah Phillips, private client associate with south-east firm Thomas Eggar, questions whether the costs involved will mean more people will try to do it themselves.

HM Courts Service says nearly a third of probate applications are now being made in person. It is running a pilot scheme in Ipswich, London and Newcastle to make the process ‘more convenient and speedier’ by offering personal applicants the choice of a telephone interview rather than requiring them to attend a probate registry.

But Phillips is concerned that such a step may remove a barrier to fraud, while Wass notes: ‘Firms nationally have seen a fall-off in straightforward probate applications, which have always been our bread and butter. There is no reason why bright lay executors can’t do it themselves – I just hope that personal applications are dealt with on a level playing field with professional ones because the Revenue watches us very closely.’

Running alongside these developments is the growing threat from both regulated and unregulated competitors, as well as significant developments in online referral services.

While accountants have dropped their long battle to gain the right to offer full probate services, licensed conveyancers have started to train as probate practitioners (see box, below). ILEX is also pursuing approved body status.

For Wass, however, the main competition is from unregulated will writers ‘who undercut our prices – we need to reclaim our ground so people choose us as trusted family advisers rather than opting for one-off transactions’.

The Institute of Professional Willwriters has been lobbying the government to regulate the trade. In the meantime, it has obtained Office of Fair Trading approval for its code of practice. But, says chair Paul Sharpe despondently, in the eight months since the code was launched a fifth of their members have resigned because they do not want to spend money complying with the code when their competitors can trade freely without similar constraints.

At the heart of the competition for the estimated 27 million people who do not have wills is, inevitably, the internet. Wass says firms need to be web savvy – not just technically, to ensure their name comes high up on any search engine, but also in embracing the internet as a way of providing services in a new era when people’s first port of call for goods and services is their computer.

However, she says it is important to balance the need to attract business with the risks inherent in doing work remotely. ‘There are huge risk management issues in making wills – over the competency of the person, whether there have been undue influences – which can come back to haunt you if you haven’t done the proper checks. I don’t like doing them without seeing the person in front of me. But some firms will take the economic view that it is a risk worth taking when they balance the work they may get against the number of claims that may result from wills going pear-shaped.’

Last month, the Epoq Group, a legal software company, launched www.mylawyer.co.uk. Consumers log on to the site to access both business and personal legal documents, including an extensive will service and a limited probate service. They provide details and the document is sent to one of a panel of law firms to be finalised. Those firms can also offer the same services on their own websites under their own brand name.

So far six law firms, including Nelsons in the East Midlands and Pannone in Manchester, have signed up for a six-figure management fee and a fixed percentage of any fees they charge clients for online services.

Solicitor Richard Cohen, Epoq’s joint chief executive, says they want to build the panel up to a maximum of 25 top-500 firms. Joining is an expensive exercise, he acknowledges, but: ‘We have spent nearly £11m developing the platform and content. If each law firm had to build it themselves, it would cost them millions.’

He explains the two pricing models involved thus: ‘If you are a consumer and you access the services through the mylawyer website, you will be put in touch with one of the panel of firms. We charge the consumer for the service and we pay the law firm for providing their services under rule 9 of the Solicitors Code of Conduct, which covers referrals. If the consumer goes directly to the law firm’s own site, the firm charges them and pays us a percentage under rule 8, which allows firms to share revenue.’

He says too many firms use their websites like a brochure, saying ‘"this is what we do, call us". But people are now accustomed to doing their banking online, buying insurance online – the legal profession is the last bastion of resistance against any form of self service’.

He also warns that firms are ‘naive’ if they don’t prepare for the threat posed by opening up the legal market. ‘Big name institutional brands already have the clients through their huge customer bases and I don’t think there is any doubt that they will start offering probate services.’

When it comes to risk management issues, Cohen says: ‘Some firms will choose to serve wills completely remotely, while others will get the client to engage online but come in to sign the completed document.’

Later this month, a new online client referral site for solicitors, www.totallyfreewills.co.uk/solicitors, is being launched. Initial marketing will be via charities which will promote the website. Consumers input their details; the will is then generated automatically, checked and finalised by a panel solicitor. It can be done remotely or face to face.

Firms pay a membership fee to join the panel, giving them exclusive rights to work coming from a particular area, and meeting the cost of the will. If the will is complex the consumer is put in touch with a solicitor, who can charge for that service. The firms also pay an introducer fee on some of the will work, so if the solicitor goes on to act as executor, they will pay a percentage of their fee income from that probate work. However, they will not pay anything if the will service leads to other work, such as doing an LPA or matrimonial work.

The website’s joint managing director Richard Harris says the skill in marketing a law firm’s services is to offer what he calls a ‘freemium’ – a free service to maximise profitable cross-selling opportunities and grow their customer base. Supermarket customers know this as the ‘loss-leader’.

These online developments raise the touchy issue of referral fees. A Solicitors Regulation Authority spokesperson says the developments were ‘certainly in mind’ when it was deregulating the rules on referral fees and fee sharing. ‘We believe our current code of conduct applies well enough to online delivery. However, we are in touch with people like Richard Cohen who have experience of ensuring that what they produce does fit in with our rules and we will look to see if any further adjustments are necessary.

‘It is clear from the Legal Services Board’s draft business plan that widening affordable access to legal services is a priority, and online must be part of that – appropriately regulated when delivered by those who are regulated.’

All this means competition for wills and routine, process-driven probate work will only get more intense, says Steer at Wilsons. ‘Solicitors have to provide better client care. They will have a more contented client base if those clients feel they are getting value for money.’

Grania Langdon-Down is a freelance journalist

BBC2 is researching a programme on solving the problems of probate. The producers would like to hear about any potentially difficult cases that have not yet begun to be resolved, or speak to anyone who is having trouble writing their will, or knows someone who is. Call the assistant producer, Robin Leach, in confidence on 020 7861 8131 or email robin.leach@talkbackthames.tv

, which covers the UK’s banks, building societies and national savings and investments accounts, has received 250,000 trace requests since its launch in January 2008. Experian’s Unclaimed Assets Register charges a fixed fee of £25, including VAT, for each search of its database of unclaimed life policies, pensions, unit trust holdings, and share dividends drawn from many companies.

Dan Curran, managing director of probate genealogists Finders, says his company routinely advises solicitors to look at those two websites because they are cheap and straightforward. ‘There can be a lot of hard slog in tracing assets for not much reward commercially but we will do it as part of our overall service to solicitors.’

Matthew Siddell, director of tracing agency Kin, says his firm complements its portfolio of services with a bespoke probate asset-tracing service, predominantly tracing lost stocks and shares. He says the two tracing websites are a ‘huge help’.For both firms, and the other big names in the probate genealogy business, such as Fraser & Fraser, Hoopers and Title Research, the main focus of their work is tracing heirs. Kin, set up in 2004, features in a forthcoming Channel 4 Cutting Edge programme Good Will Hunting, showing how the firm tracks down beneficiaries in three cases.

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In the highly competitive probate market, one threat has receded for solicitors. The Institute of Chartered Accountants in England and Wales had been seeking approved body status so members could obtain grant of probate on behalf of clients, something previously only solicitors could undertake.

But Peter Burton, the institute’s head of regulatory policy, says the prospect of being liable for a share of the start-up costs of – and contributions to – the Legal Services Board, as well as being subject to ‘onerous’ regulation, was too great a price to pay.

The institute’s sister organisation in Scotland, ICAS, which received approval last summer to provide full probate services in England and Wales, is considering whether or not to go ahead in the light of the ICAEW’s decision.

However, fears about regulation and costs have not put off the Council for Licensed Conveyancers. So far six licensed conveyancers, who already have the right qualifications and experience, have been granted licences to become probate practitioners, while 73 have started the training course.

ILEX is also keen to gain approved body status and plans to submit its application to the Ministry of Justice in the next few months.