The UK government has recently formed the Independent Commission on Dormant Assets which is investigating a revised scheme in order to identify new pools of dormant or unclaimed assets.
The existing scheme was formed in 2008, after the Dormant Bank and Building Society Accounts Act 2008 was passed, which deems bank and building society accounts to be dormant after a lack of customer-initiated contact for 15 years. The intention of HMRC is to locate these abandoned assets and use them to benefit good causes.
The commission is pooling its resources from various finance and industry experts and intends to report its final analysis to the prime minster and the cabinet office by the end of 2016. It will analyse the following:
- Which dormant assets can be brought into an expanded dormant asset scheme, and how they can be identified by industry
- The projected size of the funding pot this could produce for good causes
- Whether with the potential increase of dormant assets being released by industry the current system is able to manage the burden; and
- Whether any new legislation should include a requirement for improved transparency from industry on disclosing the level of assets within their sector.
The government estimates indicate there could be more than GBP1 billion of untapped sources of dormant assets which may include stocks, shares, bonds and pensions. Since the Dormant Assets Scheme was initiated in 2008, approximately GBP750 million has been released from banks and building societies and most of the recipients have been charities across the UK.
The new scheme is intended to provide further momentum to pass the dormant funds onto those who really need them in the charity sector. Rob Wilson, the Minister for Civil Society states, ‘More than a billion pounds of assets, that might otherwise sit gathering dust, will go into funding for charities that make a real difference to people’s lives across the country. To build an even more caring and compassionate country we need to transform dormant resources and give the funds to those who need it.’
It is easy to understand how these assets are overlooked in the first instance, considering how common it is for people to manage their assets digitally (see below). Family members may be completely unaware of the existence of bank accounts or stocks or shares, let alone having access to the data and passwords.
Other possible scenarios might be moving home and not redirecting the post, changing names after marriage, mergers between banks and building societies or a general lack of paperwork. These accounts may be unintentionally abandoned for 15 years and later released to an obliging local charity, to the detriment of the unknowing beneficiaries.
However, there are common scenarios which do not give rise to dormant assets such as intestate estates. The rules of intestacy are activated when someone dies without making a will and they determine which surviving relatives will inherit the estate. In the event that there are no surviving relatives, after investigation, then the estate automatically passes to the Crown and will not be subject to the dormant asset rules.
In the event of a testate estate, and a missing beneficiary, the process becomes more arduous due to the fact that personal representatives and trustees (in the case of trusts) have clear fiduciary responsibilities to carry out the deceased’s wishes for their estate or trust. They are under a duty to protect the interest of the beneficiaries. Therefore, if adequate measures have been taken to locate a beneficiary unsuccessfully, it is deemed reasonable to assume they have died, and distribute the funds to other beneficiaries in accordance with the will.
The personal representative or trustee may seek an indemnity from the other beneficiaries to cover the funds, should the missing beneficiaries reappear. Alternatively they may seek a similar indemnity from an insurance company. Where significant funds are involved they may instead seek a ‘Benjamin Order’ from the court, allowing the trustees to assume that the missing beneficiary is dead. In any event, the funds will be distributed, rather than being held awaiting any contact from the missing person. Therefore, the assets will not linger, or be overlooked, and the estate can be promptly wound up, unless they have passed completely under the radar in the first instance.
- STEP has recently set up a Digital Assets Working Group to address the emerging issues for practitioners in this field. Its purpose is to educate members and providing guidance and resources; and to campaign for greater clarity and uniformity in international laws and the T&Cs of internet service providers.
Emily Deane TEP is Technical Counsel at STEP
The online system for England and Wales probate applications is to be extended further, after a Statutory Instrument was laid before the House of Lords last week.
STEP attended a meeting held by HMRC on 11 October to obtain feedback on its plan to make tax returns reportable on a quarterly basis, and completely digital.
