Hiring an Heir Search Firm: The Vendor Choice That Becomes Your Liability

Attorneys make decisions every day as to when to hire an heir search firm. Typically, this involves an internet search for available firms, a referral, or past experience. An attorney may compare quotes and read reviews. However, there is more to consider. This is not merely a purchasing decision. The choice of heir search firms can have far reaching implications.

Rule 5.3 Does Not Stop at Your Own Payroll

The American Bar Association’s Model Rule 5.3, Responsibilities Regarding Nonlawyer Assistance, states in part:

With respect to a nonlawyer employed or retained by or associated with a lawyer:

(b) a lawyer having direct supervisory authority over the nonlawyer shall make reasonable efforts to ensure that the person’s conduct is compatible with the professional obligations of the lawyer; and

(c) a lawyer shall be responsible for conduct of such a person that would be a violation of the Rules of Professional Conduct if engaged in by a lawyer if:

(1) the lawyer orders or, with knowledge of the specific conduct, ratifies the conduct involved;

The title of this rule highlights the possible ramifications concerning the choice of heir search firms. The title refers to assistance, and this then defines the relationship between the attorney and the firm hired. Although not an employee, by providing assistance, the heir search firm then falls under the purview of this clause. Their work may be scrutinized by a guardian ad litem and their fee structure examined or even rejected by the court. The attorney is called upon to have made “reasonable efforts” to ensure the firm they have engaged conducts the search in a manner that is ethical and professional. You should be ready to answer questions regarding how the firm you retained handles documentation, billing, and the type of arrangement it will have with the located heir. Since individual states may word their interpretation of Rule 5.3 differently, attorneys should always check their own jurisdiction.

What a Court Can Do to a Fee Agreement You Did Not Sign

California Probate Code § 11604 states in part:

(a) This section applies where distribution is to be made to any of the following persons:

(1) The transferee of a beneficiary.

(2) Any person other than a beneficiary under an agreement, request, or instructions of a beneficiary or the attorney in fact of a beneficiary.

(b) The court on its own motion, or on motion of the personal representative or other interested person or of the public administrator, may inquire into the circumstances surrounding the execution of, and the consideration for, the transfer, agreement, request, or instructions, and the amount of any fees, charges, or consideration paid or agreed to be paid by the beneficiary.

(c) The court may refuse to order distribution, or may order distribution on any terms that the court deems just and equitable, if the court finds either of the following:

(1) The fees, charges, or consideration paid or agreed to be paid by a beneficiary are grossly unreasonable.

(2) The transfer, agreement, request, or instructions were obtained by duress, fraud, or undue influence.

When an heir search firm enters an agreement with a located heir, things can become problematic for the attorney and their client. As soon as the probate is filed with the court, the estate details become public. Heir locator firms can reach out to potential heirs and have them sign a contract without knowing the size of the estate, or what their portion may be. This is an agreement you have no control over. Neither you nor your client signed it, and yet it can have far reaching consequences. Notice that subsection (c) of the California Probate Code clearly states that the court can refuse distribution entirely. This means your client is in limbo while the court determines what is just and equitable. Each state has its own rules and statutes, so always check your jurisdiction.

The Ethics Standard Your Vendor Answers To

Attorneys hiring an heir search firm should be aware that professional genealogists have their own ethics codes. The Association of Professional Genealogists is an international organization with members in forty countries. It is the world’s largest association for professional genealogists. The Association maintains a Code of Ethics that its members agree to.

The Council for the Advancement of Forensic Genealogy goes further, and prohibits its members from charging on a contingent fee basis per the first standard in its Standards of Practice and Conduct listed below:

Not take a forensic genealogy case on a speculative, contingent, percentage, or outcome-based fee agreement as many jurisdictions have found this constitutes a conflict of interest;

The Incentive Problem Nobody Puts in Writing

One of the main triggers for a review and possible stop of distribution is a fee structure the court deems unreasonable. An heir search firm that charges on a contingency basis automatically has a personal stake in the outcome. If the firm is being paid a percentage of 30% to 50% of the heir’s share, it is in their best interest to locate the heirs with the largest stake in the estate. This also means that a negative finding earns them nothing. This is not only outside the ethical standard, but it can also result in the attorney being called upon to explain why this firm was chosen. An heir search firm billing on an hourly or flat fee basis is paid for work performed, regardless of the outcome. If there are multiple heirs, or none, their fee remains the same. The flat fee structure means the researcher has no financial stake in the outcome, which is what allows the report to be read as evidence rather than argument.

What to Ask Before You Retain

Here are six questions to ask before deciding to retain a firm. No one question is an absolute deal breaker but knowing up front exactly how the firm operates can reduce or eliminate complications and unnecessary delays for your client.

How do you bill? If they bill a percentage of the heir’s share, more questions should follow. Ask how they document negative findings. Listen closely to their response as to how they manage cases where no heirs are found.
Will you provide a written statement listing sources searched, including those that return nothing? This is important to the court, and you should know how this will be managed.
Are you available to testify if the findings are challenged, and at what rate? It is essential to know before there is an issue how they will respond.
Who is your client, my firm, or the heir you locate? Their answer will tell you where their loyalty lies.
Do you carry professional liability coverage? Whether the answer is yes or no, you should know before you retain.
May I see a redacted sample report before I retain you? A firm that is hesitant to provide a sample of their work may need further scrutiny before signing.

How firms in this field differ on fee structure, documentation standards, and testimony availability can be seen in this comparison of heir search companies.

A Composite Scenario

Consider the following case. This highlights how research that is solid and undisputed may still derail the distribution process. An attorney is administering an intestate estate where all heirs have been located except a first cousin. At this point an heir search firm offers to locate the heir for 30% of the missing cousin’s share. The estate pays nothing and the cousin is found. Everything is on track. The heir search firm has the cousin sign an assignment and then files their claim. The cousin’s share in the estate is $250,000 of which $75,000 is due to the firm.

At this point, the cousin informs the court that the paperwork was signed before knowing the estate existed, or what their share may be. This now raises fundamental questions. Is the fee grossly unreasonable? Was the signature obtained with full knowledge and consent, or by undue influence? Now the distribution stops and all heirs, not just the cousin who signed, are in limbo. The attorney is forced to reckon with a contested agreement that they did not negotiate, and there are questions as to why the attorney selected this firm. The research itself may have been flawless, but the fee arrangement has brought the entire case to a standstill.

What This Means for Practitioners

The selection of an heir search firm should never be considered simply a procurement issue. The selection process should be thorough and documented. The fee arrangement should always be in writing, and any percentage should be agreed upon before any contact with the heir. Even if you are not a party to the engagement letter between your client and a search firm, you should read and advise your client before they sign. These steps will provide a record of reasonable efforts that ABA Model Rule 5.3 requires in case the arrangement is later challenged.

Conclusion

The retention of an heir search firm does not eliminate your professional responsibility for the work that results from their efforts. Taking the extra time up front to thoroughly vet an heir search firm can save time and unnecessary scrutiny at the end. A thorough, documented vetting process is the best defense for you and your client in the event the vendor’s work is called into question.

FAQs

Does Rule 5.3 really apply to an outside vendor I retain, not just my own staff? The short answer is yes. The rule specifically addresses nonlawyer assistance and is understood to include outside vendors performing work related to client matters. State versions may vary, so always check your jurisdiction.

If the estate pays nothing, why does the fee structure matter to me? A challenged assignment stops the distribution process for all heirs, not only the heir who signed. The fee comes out of the found heir’s share and is therefore reviewed by the court overseeing your case. This stop can negatively affect your client through no fault of their own.

Can I be disciplined for an heir search firm’s conduct? Subsection (c) of ABA’s Model Rule 5.3 clearly defines the attorney’s responsibility regarding vendors who provide nonlawyer assistance. The choice of an heir search firm falls under this clause and is open to scrutiny by the court and the guardian ad litem. The best defense is a documented selection and supervisory procedure in accord with the “reasonable efforts” standard in subsection (b).

Expert Tips

Keep a short memo documenting why you selected the firm. This memo can prove reasonable efforts in the event of an inquiry.
Ask for the vendor’s fee arrangement with located heirs in writing before any heir is contacted. After it is signed, you have few options.
Confirm testimony availability at retention. If the firm cannot testify, you may be left with a report that is difficult to authenticate.
Treat a refusal to provide a redacted sample report as a dealbreaker. This tells you what you need to know about the quality of the work.

Related Resources

Author

By Norby Bandan | HeirPros

Norby Bandan is the founder of HeirPros (https://heirpros.com), a US heir search firm serving probate attorneys, estate planners, and trust officers since 2015. HeirPros produces court-ready affidavits of heirship and due diligence reports accepted by Surrogate’s Courts nationwide