Waiting for inheritance: Lawyers must pass on a ‘fair sum’ of interest under rules set by their regulator
Bereaved families whose estate is in a lawyer’s account are urged to check how much of the accrued interest they will receive once the estate is distributed.
Lawyers must pass on “a fair sum of interest on any client money they hold”, under rules set by their industry regulator, which is considering whether it is appropriate for them to keep any.
Lawyers’ interest policies can be vaguely worded and vary in how much they retain, according to a study of six national and regional firms by financial comparison site Finder.com.
He claims they were all conveying a “minimum interest”, one offering 0.3 per cent but only if the total exceeded £100, and another keeping the full interest unless it exceeded £250.
One paid 0.5 per cent less than the bank’s rate, and three offered rates of up to 1 per cent, but none were willing to transfer any winnings if they were less than £50, Finder.com says.
Liz Edwards of Finder said: “Reviewing solicitors’ policies was an eye-opener. For clients, it’s a triple loss, whereas solicitors have their cash sitting in their pockets for a long time.”
‘They can’t use the money, the money is worth less every day – especially when there is high inflation – and they lose the decent interest they would have earned if they could have put it in a savings account while rates are as high as they are now.’
Lawyers often hold clients’ money for short periods, such as during the purchase of a home, but inheritance cases can take a long time if there are delays in obtaining probate, which unlocks an estate so it can be sorted and distributed.
Finder suggests that people researching an attorney or expecting an inheritance that is already in a company’s account review its policy regarding passing on interest earned on withheld money.
The comparison site says that if you don’t think you’re getting a fair fee, you can first lodge a complaint with the law firm, and if you’re not satisfied you can contact the Legal Ombudsman, citing this as an issue of poor service.
If the Ombudsman rules in your favour, he or she can award you compensation and refer the matter to the Solicitors Regulation Authority as a breach of the rules, Finder.com explains.
He added that a company can also be reported directly to the SRA, but the regulator cannot force a lawyer to pay compensation or apologise.
Meanwhile, he points out that different rules apply to client accounts in Scotland, where lawyers are regulated by the Law Society of Scotland.
A spokesman for the Solicitors Regulation Authority said: ‘Firms must pay a fair amount of interest to clients, but we will be consulting in the autumn on how we can best protect the public.
‘This will include, among other things, whether it is appropriate for law firms to receive any interest in their clients’ accounts.’
He SRA rules on state interest‘You account to clients or third parties for a fair sum of interest on any client money you hold on their behalf.’
They also say: ‘You may by written agreement make a different arrangement with the client or the third party for whom the money is held as to the payment of interest, but you must provide sufficient information to enable them to give informed consent.’
A spokesman for industry body the Law Society said: ‘Solicitors are held to the highest professional standards and must safeguard the money and assets entrusted to them by clients.
‘Distributing funds early, without testamentary authorization, entails great risks.
‘The Solicitors Regulation Authority requires law firms to account to clients for a fair amount of interest on money they hold based on agreements made with clients and must provide sufficient information to enable clients to make informed decisions.’
The Law Society adds that since changes made in 2016 to the Probate Service, which is run by Her Majesty’s Courts and Tribunals Service, there have been significant delays in processing probate applications.
‘These delays in probate caused by HMCTS backlogs have forced grieving families to wait in limbo for months while they manage the complex administration that follows the death of a loved one, involving additional costs such as unnecessary interest payments on outstanding inheritance tax.
‘HMCTS is committed to reducing delays and while we have seen gradual signs of improvement, more needs to be done.’
Sarah Manuel, director of professional standards at estate advisors organisation STEP, said: ‘Solicitors in England and Wales are regulated by the Solicitors Regulation Authority and must comply with its rules on how they manage their clients’ money.
“Lawyers must avoid any conflict of interest that might arise from holding money for longer than necessary. In many cases, money is held only for short periods of time.”
STEP says that when appointing lawyers, it should be verified that they hold a recognised specialist qualification and are members of a specialist professional body.
The organization has its own code for members which says they must fully disclose any fees or similar money to their clients when they start working with them.
‘People should also expect to see any interest accrued or retained by an attorney set up in the estate accounts for transparency purposes,’ STEP adds.
‘People should always read the fine print of any document before signing and be wary of hidden charges or fees.’
Some links in this article may be affiliate links. If you click on them we may earn a small commission. This helps us fund This Is Money and keep it free to use. We do not write articles to promote products. We do not allow any commercial relationships to affect our editorial independence.
