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Sunday, November 11, 2018

Search for missing beneficiary should be proportionate to bequest

One of the most frustrating things that can occur in the administration of an estate is that a beneficiary might be missing. This usually happens when a will hasn't been updated for a few years and contains a bequest that is out of date but still legally valid. The ones I've seen are mostly gifts made by a parent to "all of my children" before one of the children became estranged from the family.

What on earth is an executor to do? He can't just ignore the gift in the will. The bequest doesn't become invalid just because nobody has seen their sibling for years. Neither can he just choose someone else to receive the gift because he is bound by the terms of the will.

There are some possible ways to deal with the missing person's share of the estate, but all of them require court permission for the executor to vary the terms of the will to bypass that missing person. And to get that order from the court, the executor has to prove that he or she has carried out a reasonable search for the person.

I've recently read an article from Suzana Popovic-Montag, an estate lawyer in Toronto. She makes the point in her article that when an executor is searching for a missing beneficiary, the cost and the extent of the search should be proportionate to the size of the bequest. As Ms. Popovic-Montag points out in her article, it doesn't make sense to spend thousands of dollars to find someone to give them a $3,000 gift. Click here to read the article.

This is an area in which an executor must be very careful to avoid personal liability. If an executor fails to make a reasonable search and fails to get a court order directing him or her to pay the bequest to someone else, there is a risk that one day the missing person or one of the missing person's children will show up and demand the inheritance. If the executor has simply kept the funds or given them to someone else, that executor is going to be on the hook personally for the funds.

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