Risk management

Tracing beneficiariesEsmerelda died alone at the age of 85 in an enormous house on the outskirts of the secluded country village in which she had lived for the whole of her adult life.

She had no children, had never married and had not made a will.A week after the funeral, Esmerelda's estranged cousin Lionel, her administrator, visited John, a local solicitor.

John explained the intestacy rules to Lionel, who said he believed there was another branch of the family - 'the Moriarty clan'.

He thought there were two of them still alive, but their precise names and where they lived he did not know.John pressed Lionel for more information.

Together they drew up and went through a family tree, which indicated the exact relationship of the two surviving Moriartys to the deceased.

They also visited Esmerelda's house, where, to John's amazement, there was no evidence of any family whatsoever - no photographs, portraits, address books or Christmas cards.John put an advert in a local newspaper.

No one replied.

Then, confident that all beneficiaries had been identified, he collected in the estate, which came to over 600,000.

He paid 200,000 to Lionel, and put the balance on deposit for the benefit of the Moriartys.Six months later John decided to try once again to trace the Moriartys.

This time he put an advert in the London Gazette.

To his horror, he received 15 replies.Racked with anxiety, John obtained Lionel's authority to instruct a leading genealogist to investigate the matter.

The genealogist's report revealed that nine of the 15 respondents had genuine claims to a share of the estate.

He wrote to Lionel explaining that he had been overpaid.

Lionel replied that he had already spent the money.The genealogist had been expensive - around 14,000 for a full investigation and report.

The cost to John's professional indemnity insurers was over 140,000 - and the claim was reflected in his quotation the following year.John should have advised Lionel to advertise properly from the outset and comply with s.27 of the Trustees Act 1925, as amended.

He should also have explained that Lionel could not expect to rely on that provision, because he was already aware of the existence of beneficiaries who could not be found.John should then have advised Lionel to consider appointing a genealogist and taking out missing beneficiaries insurance.

In general, solicitors should also advise administrators to consider obtaining an indemnity from any identifiable beneficiaries.l For information on claims prevention, contact Richard Gerrard at St Paul International, tel: 020 7645 6800.