Assets and Liability Discovery in a Digital Economy

What does the rise of the digital economy mean to for Executors, Deputies & Attorneys?

The digital economy is creating many challenges for private client practitioners, as clients increasingly manage their lives – and finances – online. According to recent survey conducted by Direct Line 88% of professionals believe the rise in digital banking is making it more difficult to identify estate accounts [1]. However, while causing challenges, the rapid rise of digital technology might also present potential opportunities and solutions.

What challenges exist in identifying estate accounts?

At the risk of sounding simplistic, I find it helpful to consider the basic duties of a Personal Representative (PR). Whose responsibilities include collecting in assets, discharging debts and administering the estate in accordance with the deceased’s wishes and the law. Similarly, a Deputy or Attorney is under a duty to secure all assets and liabilities to manage their client’s property and affairs.

However, this not always as simple as it sounds and undoubtedly anyone reading this will have had their own experiences of memorable matters. Establishing the assets and debts of a client can be a thankless and time-consuming task, often reliant on the ubiquitous carrier bag of paper records, or filing cabinets and cluttered houses. Reviewing paper records is time-consuming but at least gives a starting point. Increasingly, we are seeing issues highlighted in the Direct Line survey where online accounts and paperless billing combined with the sheer range of modern financial service providers makes discovery more challenging and unreliable.    

What is the impact for professional practitioners?

Overlooking assets

Arguably missing a debt or liability is a greater potential risk, which could lead to personal liability for the PRs. Of course protection is often sought through Trustee Act notices, advertising for potential claimants but there some growing issues with this approach.

Most notably, sub-section 2b states that nothing frees the PRs from making searches similar to those an intending purchaser would be advised to make. Exactly, what this means is debatable but increasingly easy and inexpensive access to digital credit data may mean such searches should be considered.

Secondly dicta in RE Yorke [1997]and Re Studdert [2020] suggest that Section 27 also does not protect PRs if;

• there are grounds for suspecting liabilities exists; and
• it is unlikely that a claimaint would see the advertisements  

While both these cases vary from standard administrations, in both cases there were grounds for the PRs to believe that liabilities might exist. It’s foreseeable that in estates where the deceased might be known to have had financial difficulties, simply advertising is not sufficient and further due diligence is advisable.

A more general issue with Section 27 is that is does not prevent creditors following assets into the hands of beneficiaries. It would be natural for a beneficiary facing such a claim to be aggrieved and seek potential action, in which case demonstrating all efforts of due diligence would act as protection.

How can technology assist practitioners?

Despite the challenges of identifying estate accounts in our modern economy, technology itself perhaps serve to create opportunities for better due diligence.

Online services such as My Lost Account and the Experian Unclaimed Asset Register are both helpful in searching for lost and dormant accounts. While the free Death Notification Service can be helpful in notifying participating members. Each service is useful but it’s important to recognize their individual limitations.

Premium asset and liability searches such as the Estatesearch Financial Profile Service offer the most comprehensive option, costing in the region of £150 + VAT, drawing data from available sources and using technology to automate an efficient due diligence process. Our search built up over the past several years includes;

• Identity Tracing – to confirm subjects’ personal detail against electoral roll and private databases
• Liability Data – real time Experian credit data sourced from over 600 organisations
• Asset Data – from banks, building societies, share registrars, pension providers and insurers to help identify live, online, lost and dormant accounts
• Add. Data - AML of subject, Company Directorships, previous Deputy or Attorneys and Experian UAR data.

The result is a comprehensive and cost-effective technology led service which can be used to clearly demonstrate due diligence and all reasonable care. Not only helping add value and peace of mind for clients but delivering efficiency and risk mitigation for professional advisors.

Practical steps to mitigate risks

As professionals, either acting or advising, clients in estate administration or court of protection matters you play an important role in advising clients who might be unfamiliar with the process of the potential risks or costs and ensuring access to the best possible services 

The rise of the digital economy creates new challenges, but equally creates the opportunity for new technology led solutions which influence the evolution of what constitutes ‘reasonable’ due diligence or best practice. 

Practitioners should always be reviewing process and procedure in line with emerging risks and considering their approach whether as PR, Deputy or Attorney or advising the same.

Presently, my recommendation is that practitioners as a minimum should review their engagement letters to ensure risk of missed assets or liabilities is effectively communicated, solutions offered, and appropriate instruction taken.

In collaboration with industry experts Estatesearch have developed some suggested client care which we’re happy to share, aimed at helping you add value for the client and mitigate against risks. If you’d like a copy, or would like to discuss how else we’re using technology to support private client practitioners, please feel free to get in touch.

References

[1] https://www.directlinegroup.co.uk/en/news/brand-news/2020/24032020.html