Estate administration costs and tricky beneficiaries
It is not just estates where independent administrators have been appointed that have difficult beneficiaries. A recent court of appeal decision might see a rise in challenges to executors' costs.
In this article, we set out some practical tips about dealing with difficult beneficiaries and following the recent Court of Appeal decision in Thomson Snell and Passmore v Kenig [2024] EWCA CIV 15.
How best to communicate with difficult beneficiaries?
We encourage you to set out the rules of the game as early as you can.
Tricky beneficiaries usually like to email often and demand instant replies. We have found sending out monthly reports to all beneficiaries, on behalf of your executor clients, is a helpful way of creating a paper trail which demonstrates regular communication. It also helps you avoid the temptation to respond to each and every complaining email from a difficult beneficiary.
It can be hard to stick to if you are faced with a constant barrage of emails from a difficult beneficiary complaining about how the executors are administering an estate, but it can help.
Make a note of your time
When you are dealing with constant requests from a beneficiary for information or explanations as to why certain things have or haven’t happened - it sounds obvious - but it's really important to keep a really clear note for the file of the time you have spent dealing with the request. Litigators are used to preparing file notes recording the time they have spent on a task, but it might not be an obvious thing for an estate practitioner to do.
Some time recording systems have an internal narrative box which can be useful. If not, a quick attendance note will save you a lot of time in the future if you ever are called upon to explain why your estate administration costs are so high - a point we return to later on in this article.
When you are making a note of the time - take time to think about how much extra time you have spent because of the requests made by a particular beneficiary compared to a more reasonable one.
Again, it will help enormously if you face a challenge about high estate administration costs much later down the line - it is so much harder to do this retrospectively. And by their very nature, these sorts of estates never seem to conclude anywhere close to the executor's year.
Challenging estate administration costs
This is a very topical point following the recent Court of Appeal decision in the case of Kenig v Thomson Snell and Passmore LLP. Here a disgruntled beneficiary Mr Kenig challenged estate administration costs originally estimated to be between £10 - £15k which actually came in at around £54k.
The executor had already agreed and paid the costs so the question before the Costs Judge was whether Mr Kenig had a right under s71 (3) of the Solicitors Act 1974 to call for an assessment.
After hearing some interesting arguments from counsel for the Estate including a submission that the invoices should be kept confidential, the Judge concluded that Mr Kenig did have the standing to ask the court to assess the bill - as a person interested in any property out of which the executor has paid or is entitled to pay the bill - rather than as the person chargeable with the bill.
Previous authorities had suggested the only way a beneficiary could challenge estate costs was to call for an account.
The solicitors appealed the decision, but the Court of Appeal recently dismissed the appeal upholding the first instance decision.
Will challenges to costs increase following Kenig?
The decision may well lead to a rise in challenges to estate administration costs - even those estates that you think have long since concluded - with a happy executor having signed off your bills and all having been paid from estate funds.
If it is not currently your practice to inform residuary beneficiaries of cost estimates and to let them have copies of invoices, we would encourage you to do so.
However, there is divided opinion following the Kenig decision as to whether you should now seek the approval of the beneficiaries in respect of estate administration costs.
If the beneficiary is already being difficult, you are unlikely to get their consent to your executor clients' costs. You are treading a fine line between having a good argument to defend a challenge to estate administration costs by seeking consent, yet potentially are opening up another line of attack in respect of your ongoing costs.
At the very least, by updating beneficiaries about increases to estimates and sending copies of invoices you are providing transparency and achieving some measure of protection against a future challenge. Actual consent might be harder to achieve.
Keeping clear file notes justifying the additional time caused by the tricky beneficiary becomes even more important.