The Heir Tracing Industry - Behind The Scenes
It's A Matter Of Facts
By C. Tim Rodenbush - c.tim.rodenbush@heirsearch.com
Percentage Based Search Firms aka "Heir Hunters"
When windfall profits may be available, it should not be surprising that numerous individuals and firms exist who involve themselves in a search for heirs, with or without the knowledge of the probate attorney or trust officer, their compensation being arranged between themselves and the missing heirs after they have completed their search. This method of compensation is often referred to in their advertising as "no fee to the estate." The percentage approach to locating missing heirs is the most common you will encounter when dealing with outside sources. Typically, behind the scene, as soon as public record information is filed relating to an intestate estate of a certain minimum size, numerous percentage based heir search firms will begin their search to "get there first" usually without the prior knowledge, or authorization, of the Probate Attorney or Trust Officer. Once the heirs are located the negotiated fees will vary between 20% and 50%, averaging 33%, of the heir’s inheritance. After a compensation contract has been consummated between the heir(s) and the search firm, the probate attorney handling the estate subsequently receives a letter from a fellow attorney then acting as the legal representative of the purported heirs (without mention of the fact it liaises with a percentage based search firm which will receive a sizeable percentage of the heir’s inheritance once disbursed.)
This method of compensation and involvement is not without controversy. Many in the legal field are of the opinion that the withholding of information concerning the inheritance from the heir, until a contract with the heir is consummated, puts the heir at a distinct disadvantage. The details about the estate and the amount of the inheritance are not disclosed to the heir until after the percentage contract is signed. In fact, many ethics opinions state that these are champertous contracts. Notwithstanding, there tends to be considerable competition in the heir hunter segment of the industry from the standpoint of each firm "getting there first" to negotiate an agreement with the missing heirs. That is why many percentage-fee based firms start a search without estate authorization, as soon as they have any information about the intestate estate, particularly its size.
Non-Percentage Based Search Firms - "A Better Way"
Not all search firms offer their services with its fees being determined on a percentage basis through negotiations with the missing heirs. Although they are in a distinct minority, the fees of those firms are based on a schedule of charges based upon the nature of the search required and the information available, never on the size of the trust or estate. The non-percentage fee, as quoted in advance of starting the search can either be taken from the heir’s share due or from the estate, whichever is determined in advance by the probate attorney or trust company as being most equitable to all parties. Typically, the probate attorney will obtain a court order of the non-percentage based search firm’s fee quotation authorizing that firm as the official search firm hired by the estate. This procedure tends to protect the heirs from the standpoint of potentially having a percentage based search firm (or multiple firms) claiming it can act on the heir’s behalf.
Which Approach Is Most Effective At Finding The Heirs?
In terms of which type of firm, percentage or non-percentage, is better at finding the heirs… there is no difference, other than the cost of the service, which can be significant and, always borne by the missing heir.
Who Should Pay For The Search?
To answer that question, when hiring a professional heir search firm, try putting yourself in the missing heir’s shoes. Every case and every situation is different. At times you may choose the search fees to be taken from the heir’s share due and at other times it may be more appropriate that the search fees be a general estate expense. Whichever approach is chosen, the fees should be reasonable which typically translates to a non-percentage based choice. When considering a third-party vendor to locate heirs it is your fiduciary responsibility to represent the best interests of the heirs/estate – after all it is their money you are spending. You have the choice in the type of firm with which to associate the heirs and yourself. By selecting a search firm carefully and without unnecessary delays you can protect everyone’s best interests.
