The Dilemma of the Missing Beneficiary

The task of an estate trustee is rarely an easy one. Much less so when a beneficiary of the estate was born in 1925, is believed to have lived in the United Kingdom, and whose whereabouts are not forthcoming from any of the deceased’s family members.  On top of this, he is rumoured to have had an affair with his sister-in-law, after which he was threatened by his brother and may have had reason to go into hiding.

The above facts are drawn from a real case, Steele v. Smith,¹ which was recently decided in Ontario. Did the estate trustee in this situation have an obligation to attempt to find the elusive beneficiary?  What should he have done if he couldn’t find him? These questions, and other related legal issues, will be discussed in this blog.

A Trustee’s Duty to Inform Potential Beneficiaries of the Trust’s Existence

The Supreme Court of Canada has held that trustees have a fiduciary duty to potential beneficiaries to inform them of the existence of the trust. Trustees have an obligation to take the steps that an honest and reasonably skillful and prudent trustee would have taken in order to notify potential beneficiaries of the existence of the trust.²

The duty to endeavour to identify and locate all beneficiaries has been held to apply to an estate trustee in administering an estate.³

Ontario’s Estates Administration Act also imposes a duty on executors to make “reasonable inquiries” with respect to people who may be a beneficiary of the deceased’s estate by virtue of a relationship traced through a birth outside marriage.⁴

Ascertaining and Locating Missing Beneficiaries

The process of identifying an estate’s beneficiaries may not be straightforward where the will bequeaths property to classes of beneficiaries rather than naming them directly, i.e. “my children”, “my issue”, etc. The same difficulty may arise where the deceased dies intestate, and the distribution of the estate is governed by the Succession Law Reform Act.⁵

In other cases, the beneficiaries of the estate may be named in the deceased’s will, but their whereabouts may be unknown.

To identify and locate the beneficiaries of the estate, an estate trustee should consider the following methods of ascertaining the deceased’s next of kin:

• Contact any known family members, co-workers, friends, neighbours, etc. of the deceased
• Conduct searches on social media (search for contacts/ connections on the deceased’s accounts) and online search engines, databases, and genealogy websites
• Request any of the deceased’s public records from the Office of the Registrar General of Ontario
• Retain a professional, such as a skip tracer, private investigator, or researcher
• Place advertisements in local newspapers in the jurisdiction of the beneficiary’s last known address

What Next?

If none of the search strategies described above turn out to be fruitful, the estate trustee has a number of options to consider in completing the administration of the estate.

I. Order Declaring the Beneficiary Deceased or an Absentee

If, based on the estate trustee’s reasonable inquiries, it appears that a beneficiary has died or has disappeared for years, the estate trustee may consider applying to court for an order under the Declarations of Death Act⁶ or the Absentees Act⁷ that the person in question is deceased or an absentee. However, the language of these statutes is quite narrow and only applies to specific fact scenarios. For example, to obtain a declaration that a person has died, the estate trustee would need to establish, among other things, that he or she “disappeared in circumstances of peril”.⁸

II. Benjamin Order

If a declaration of death or as an absentee is not possible in the circumstances, the estate trustee should consider applying to court for a “Benjamin Order” (named after the 1902 U.K. case Neville v. Benjamin), which would allow the estate trustee to distribute the estate as if the beneficiary in question had predeceased the deceased, while absolving the estate trustee of liability, but still leaving open the possibility of the lost beneficiary coming forward and making a claim against the recipient. Such orders are rare, but have been granted by Ontario courts.⁹ In determining whether to grant a Benjamin Order, the courts’ analysis has centred around the sufficiency of the efforts made by the estate trustee to locate the missing beneficiary.

III. Payment of Funds Into Court

In situations where a beneficiary cannot be found and reasonable efforts have been made to locate the person, the estate trustee may bring an application to pay the funds into court pursuant to section 36 of the Trustee Act.¹⁰ However, the court must be satisfied that the estate trustee acted in a bona fide manner in doing so, otherwise it may award costs against the estate trustee if it is found that the funds were paid into court unnecessarily.¹¹

IV. Seeking the Court’s Opinion, Advice and Direction

If all else fails, the estate trustee can make an application seeking the court’s opinion, advice and direction with respect to any unascertainable beneficiaries pursuant to Rule 14.05(3) of the Rules of Civil Procedure. In support of the application, the estate trustee would need to include an affidavit setting out the “reasonable inquiries” taken to identify and locate the missing beneficiary.

Disposition in Steele v. Smith  

At this point the reader may be wondering what course of action was taken in the particularly difficult scenario described at the start of the blog. In that case, Steele v. Smith, the estate trustee made extensive efforts to locate the missing beneficiary, including on-line searches, contacting family members, and employing a U.K. tracing company. Consequently, he sought a Benjamin Order declaring that the missing beneficiary predeceased the testator, so that he could divide the residue among the remaining beneficiaries.

After reviewing the evidence, the court granted the order requested, finding that the estate trustee had exhausted all available avenues of inquiry. In the court’s view, it was unlikely that further efforts would yield positive results.

Takeaways

As we have learned, an estate trustee’s job can be complicated where beneficiaries may exist who are not readily identifiable or easy to locate. In such situations, the law in Ontario requires that reasonable inquiries be made with respect to such beneficiaries. If such efforts are made thoroughly and with a genuine intent to find the missing beneficiaries, an estate trustee can then proceed to court with some confidence that the court will grant an appropriate order allowing the administration of the estate to proceed.