How to Choose a Professional Fiduciary

Our firm has seen countless situations where a professional fiduciary could have saved a client thousands or even millions of dollars. A professional fiduciary won’t hold a grudge against any of your other children. They won’t invest millions of your dollars in their own business only to see it collapse. They won’t disappear for months at a time abusing drugs and alcohol while living off of your money. We have seen all of this and much more. Here’s an overview of when and how to choose a professional fiduciary.

What is a Professional Fiduciary?

A professional fiduciary is a person who is paid to act in a position of trust on the behalf of another person. They may serve in any of the following roles:

• Trustee of a trust
• Estate executor
• Conservator of a person and/or estate
• Agent under a medical or durable power of attorney
• Facilitator of everyday financial tasks like paying bills

In California, if you serve as a fiduciary in three or more cases for non-family members, you must be licensed by the state. To obtain a professional fiduciary license, you must:

• Take required courses
• Pass an exam
• Pass a background check
• Be bondable
• Attend continuing education classes

What Responsibilities Does a Professional Fiduciary Have?

In California, a professional fiduciary must:

• Abide by the California Probate Code.
• Abide by a strict Code of Ethics.
• Be responsible for the actions of anyone hired to assist in managing a client’s needs (such as other professionals like realtors and investment companies).
• Be accountable to the court for any losses your client incurs through improper asset management.

Why Use a Professional Fiduciary?

Many people choose to use a trusted family member or friend in the roles listed above. So why would you pay someone you don’t know to handle these tasks for you? Let’s talk about three common scenarios where you may wish to hire a professional fiduciary.

#1: If you don’t have anyone else who can adequately perform the tasks required, you may want to consider naming a professional fiduciary in your estate plan.

Some clients without close living relatives find themselves at a loss when it comes to naming a successor trustee, executor, and agent in their estate planning documents. Others may not feel comfortable choosing family or friends who are estranged, less than trustworthy, or who live far away.

If any of these factors reflect your situation, you may want to consider having a professional fiduciary serve as trustee.

#2: If your adult children struggle to get along and your family dynamics are challenging, you may want to consider naming a professional fiduciary in your estate plan.

A successor trustee must remain impartial and fair when dealing with beneficiaries. This can be challenging in families where the adult children don’t get along. Power struggles tend to get worse after a parent passes away, not better. If you suspect there will be fighting amongst your kids when you’re gone, your instinct is probably right.

Sometimes parents name co-trustee children, not wanting to leave anyone out. But if your co-trustees struggle to cooperate, they may decide to designate a professional fiduciary to take over the trust administration anyway.

Instead of trying to appease everyone in the family, a better option may be to select an experienced, unbiased professional fiduciary now who can act as trustee and deal fairly with all parties.

#3: If you create a Special Needs Trust for a disabled child, you may want to designate a professional fiduciary as the trustee.

Some parents of disabled children name a family member as trustee of their Special Needs Trust. Others prefer to name a professional fiduciary who has the advantage of experience.

Most professional fiduciaries manage trusts and act as professional trustees regularly. They know exactly what expenses a Special Needs Trust can cover without triggering a loss of government benefits for the beneficiary. That can be a major advantage when caring for your disabled child after you pass away.

How to Find a Professional Fiduciary

A dependable professional fiduciary is worth their weight in gold. But how do you find one you can trust? Here are five tips on selecting the best possible professional fiduciary.

#1 Ask for referrals. Try asking your estate planning attorney and/or CPA for a referral to a qualified, reputable professional fiduciary. Most estate planners work regularly with one or more professional fiduciaries in the area and they can often steer you in the right direction.

#2 Find exactly what you need with an online search. The Professional Fiduciary Association of California offers a handy Fiduciary Search that allows you to filter results by location, specialty, and language. This can be especially valuable if you’re seeking a specific skill set – for example, a Mandarin-speaking enrolled agent or a daily money manager who’s fluent in Spanish.

#3 Run a background check first. You can and should check a potential fiduciary’s license with the California Department of Consumer Affairs to ensure their qualifications are valid before hiring them.

#4 Seek and call professional references. Professional fiduciary references may include attorneys, CPAs, and family members of clients the fiduciary has worked with in the past who are familiar with their work and can testify to their competency.

#5 Interview potential professional fiduciaries before making your final choice. Given the significance of the role they will play in your estate plan, it’s natural to want to have complete trust and confidence in the fiduciary you select.

Before selecting a professional fiduciary, consider interviewing them and asking pertinent questions. You may want to inquire about their experience level, their competence in specific skills, their accessibility to clients, their fees, their operational policies, their security procedures, and any other factors that may be of concern to you.

How Much Does a Professional Fiduciary Cost?

As with most professionals, the cost of professional fiduciary services varies according to the complexity of the client’s needs and the type of service they require. The fees may be charged on an hourly, monthly, annual, or another basis.

Therefore, be sure to review your professional fiduciary’s fee structure in your initial interview so you know what to expect. No fees should be charged until services are rendered.

If you need help deciding whether or not to use a professional fiduciary in your estate plan, feel free to contact our office. We can also offer referrals to trusted, pre-vetted local professional fiduciaries if you need help getting started in your search.

Law Offices of Daniel A. Hunt

The Law Offices of Daniel A. Hunt is a California law firm specializing in Estate Planning; Trust Administration & Litigation; Probate; and Conservatorships. We've helped over 10,000 clients find peace of mind. We serve clients throughout the greater Sacramento region and the state of California.