Risk management in wills, trusts and probate

Historically, claims in wills, trust and probate matters have not troubled insurers as much as those arising in, say, property transactions or personal injury litigation. There is no doubt, however, that we are seeing an increase in claims in this area. What this article aims to do is to highlight some of the risk areas and suggest a few simple ways of reducing the risk of a negligence claim.

The first problem with a will is not drafting it, but getting the right instructions. Money-laundering regulations mean that you (hopefully) check the identity of all clients before the firm accepts a retainer. While you might think that fraud and wills are not a likely combination, there has been the rare instance of someone pretending to be the testator and giving instructions for a will that they then execute purporting to be the person named. You should always check clients’ identities unless they are already well-known to you; if you’re embarrassed to ask for ID, consider how you will feel about dealing with a subsequent claim.

Many of the cases that are litigated concern allegations of duress, undue influence or lack of capacity, and this must always be a consideration. It goes without saying that clients should be seen on their own, even if they are husband and wife, or very elderly – it’s not unusual for someone else to make the appointment and to accompany the client to your office, but do make sure the testator is giving you instructions directly and without having to refer to anyone else. Again, it requires tact and diplomacy to insist on seeing a client who may be frail, poorly-sighted or hard of hearing without family members present, but you must be satisfied that you are receiving their own instructions, and not those of family members.

Capacity is a more difficult issue, and it can be embarrassing to have to suggest to a client that you may need to get a doctor’s opinion. Make an initial decision, and record your views in a note – if the will is challenged, which could be some years afterwards, then at least your note will indicate why you decided they were capable of giving instructions for a will. Even a brief record may support you later on, for example, ‘she seemed alert, understood what we were discussing, was able to identify the names and ages of her grandchildren, explained why she was not making any gift to her son’. If you’re unsure about capacity then take instructions and proceed in any case – it is better to have a will with allegations of lack of capacity than to have an intestacy and an allegation of delay/negligence. Again, make notes of your conclusions and the reasons for them, and take steps to get a further opinion on the question of capacity if you can.

If you are asked to visit a client in hospital, or if you are told that they are terminally ill, then you must be alert not only to questions of capacity but to urgency. Bear in mind that someone receiving large doses of pain relief may be fully alert and conscious at some times, and unable to give instructions at others – seek advice from medical staff and, once again, make notes recording your discussions, conclusions and the time of any visits as these could be vital in any future challenge. If you know that a matter is urgent, then only accept instructions if you know you will have time to conclude the matter quickly, or can trust a colleague to deal with it. The words, ‘the client was 95, but we didn’t think there was any real urgency’, could come back to haunt you.

Assuming that your client does have full capacity, and that there is no urgent need for them to prepare a will, then you can move on to the question of getting instructions. The client may have very clear views as to how they wish to dispose of their property, but you must still ask the right questions to make sure that you have full instructions from them. Family relationships are more complex than ever these days, and clients may simply think that they do not need to tell you about the estranged son or daughter, the marriage that broke down but was never formally concluded by divorce, or the child who has been treated as their own but who was never formally adopted.

For example: one solicitor taking instructions for a will asked their client the simple question – do you have any brothers or sisters? The testator advised them that he had two brothers – he failed to mention that his other siblings had died, leaving surviving children.

On his death, they distributed the estate without making any additional enquiries, and then received a claim from the nephews and nieces who had been overlooked.

Another essential issue to deal with at this point is the question of joint tenancy/tenants in common. Don’t take your client’s word for the status of any property ownership, check it yourself and if your advice is that the joint tenancy should be severed, then don’t delay, because a claim will surely follow if the client dies and no action has been taken.

Perhaps one of the most frequent problems is the client who decides to make a will and gives instructions, but then fails to follow up on the draft will that you sent them. That’s their problem… isn’t it? Not if the client dies and the potential beneficiaries later claim that you delayed in arranging execution, or that the testator thought that they had a validly executed will.

For example, a solicitor went to visit an elderly client. Although her capacity was not in doubt, the client was simply unable to make up her mind as to how her house should be disposed of, and the solicitor left without clear instructions. Shortly afterwards the client died, and her daughter brought a claim against the solicitors on the basis that they had failed to carry out her late mother’s instructions, and that if they had done so she would have inherited the house absolutely. Fortunately, the solicitor concerned had made a detailed file note immediately after the visit, recording that she did not have sufficiently clear instructions to draw up a will. The claim was defeated at trial.

Make sure that when you send them the draft will you set out very clearly that it is only a draft and not the final document. Mark a date in your diary to check on this – you could keep a separate diary or calendar just for will instructions, and if you haven’t heard from the client, follow it up. If no further instructions are received, then no doubt you will want to send them a bill, but make sure that you warn them in writing that the will has not been executed and what the position is in this case (intestacy or a prior will still valid). Without a record of this, it will be much harder to defeat a claim at a later stage.

Drafting errors are a perennial problem, and the only solution to these is to read them very carefully. Try out clauses – insert dates or values, to see if they really work. Do fractions or percentages add up to a whole number? Is there a provision made in the event that the beneficiary predeceases the testator? What about their issue? Beware of precedents and standard clauses because, although these can save you a lot of time, there is a high risk of them being applied inappropriately, or for the wrong clauses to be included. When you read a document that you have drafted, you will see what you expect to see and may not spot the additional clauses that have accidentally been left in.

Always end by reviewing your original instructions – does the will you have drafted meet the testator’s intention? The simple expressed wish, ‘I want my wife to have the house free of any debt’, may have become lost in the detail of considering severance of tenancy, tax issues, gifts of residue and so on.

Finally, it is your responsibility to ensure that the will is executed properly. Ideally your clients will come to see you and you will supervise the execution, but, if this is not possible, you must not only set out the instructions for execution but check the will when it is returned. If there is an obvious flaw, such as a beneficiary’s name as executor or if the testator has made written additions to the will, you will be facing a claim when it is subsequently rejected by the Probate Registry. Don’t forget that it may be many years before your drafting and the execution of the will are called into question – files should be retained until either a new will has been made or a grant of probate has been obtained, because a negligence claim will run from the date of death, not the date when the will was executed.

Some of the same questions arise in relation to estates – you must seek proof of identity and, unfortunately, you can’t afford to take what your clients say at face value. Be sure that the person instructing you is authorised to do so, even if there are obvious family relationships. If you act on instructions from someone other than the executor then you run the risk of an argument about your costs. It makes sense to keep beneficiaries informed of progress, especially residuary beneficiaries, but it would be wise to get the express consent of the executors to this. In the long-term, it will save you a lot of trouble as you won’t have to field phone calls asking, ‘when am I going to get my money?’ As the cost of any letters or calls will be part of the estate account, it’s worth making sure the executors have agreed to this.

You should also be scrupulous about checking the identity of beneficiaries. While a ‘Tichborne Claimant’ scenario is fairly unlikely, it’s more probable that you will pay the wrong person. For example: solicitors distributed an estate and sent the funds by CHAPS payment to the beneficiaries who were all living overseas. The main beneficiary, the deceased’s son, shared the same initial and surname as his own son, who was due to receive a small legacy. Payment was sent to the grandson by mistake. The grandson claimed that he was unaware of the amount he was due to receive, and delighted to find it was such a large sum, he immediately spent it. He was not on good terms with his father and refused to return the money. The chances of recovery were so low (and the costs of doing so overseas so high) that insurers had to pay the money again to the father.

A bankruptcy search against all beneficiaries is recommended because you can’t assume that family members will know if a distant relative has been made bankrupt, or indeed that they will tell you if they do know. Payment in these circumstances is likely to result in a claim from the trustee in bankruptcy to recover the sum paid to the beneficiary.

Unfortunately, the greatest risk of fraud comes not from clients but within your firm. Probate and trusts work is high risk in this respect, because it is relatively easy for practitioners to withdraw money without the client noticing, at least at first. This is one of the reasons why a firm’s file audit procedure should include all areas of work and all fee-earners, including partners. It is not unusual for probate fraud to be committed by someone who has worked at the firm for years, who was a trusted employee and who received minimal supervision for exactly these reasons.

Be wary of anyone who seems to be living a lifestyle beyond their means or beyond their income, as far as it is known to you. There may be entirely legitimate reasons for them to have an expensive car, exotic holidays or a large house – they may have inherited wealth, had a gambling win or have made wise property investments – but it might make you curious. Fraudsters will often begin with very small sums and then increase the amounts stolen when they find the theft is undetected; often the fraud is discovered by chance rather than being picked up by auditors.

For example: X, a partner in a small provincial firm, seemed to have an enviable lifestyle including a high-performance car and holidays in the Seychelles. His wife ran a small business and his partners assumed that this must be doing very well indeed as his earnings from the practice were not substantial. The business was in fact doing very badly and X was using clients’ funds to pay the outgoings on it as well as to pay for their lifestyle.

Simple systems can help to reduce the risk of fraud. Regular, random file audits should assist with this. Systems that require cheques to have the name of the client file as well as the payee, or a copy of the bill or invoice attached to them, should be in place in any event. Your firm’s management information or accounts systems should be able to pick up any unusual activity – sadly, this sort of theft is sometimes not only from estates, but also from the funds of clients living in care homes or sheltered accommodation.

The best protection against both fraud and negligence is to have an open atmosphere, where any concerns or problems can be aired with colleagues. All instructions, telephone calls, emails and client meetings should be recorded on the file so that if the fee-earner is absent at any time, a colleague can pick the file up and deal with it. Make sure that support staff are trained in both procedures and risk, so that they too understand the importance of keeping file notes. The risk of a negligence claim can never be removed entirely – a disgruntled beneficiary will look for someone to blame if they don’t get what they were expecting – but you can make it harder for a claimant and easier for your insurers to defend any claim if you have followed the rules and kept good records.

Olivia Burren is a solicitor and senior risk management consultant at Travelers Professional Risks Limited. She can be contacted at oburren@travelers.com