Private Professional Fiduciary

Why should a private professional fiduciary be appointed to administer either a revocable living trust or a probate estate?

PROFESSIONAL EXPERIENCE

A private professional fiduciary is in the business of acting for beneficiaries of a trust or heirs at law in a probate estate. He or she may also serve for the benefit of a conservatee in a conservatorship matter.

Advantages of appointing a private professional fiduciary include the following:

Professional and experienced in managing trusts and estates. A private professional fiduciary has been trained to manage the financial affairs of another person. He or she is experienced in making financial decisions for an incapacitated person during life, or in the settlement of the estate at death.

Experience navigating probate court proceedings. The private professional fiduciary is knowledgeable about the necessary steps in the probate process and can work easily with the estate attorney in the preparation and signing of the documents to be filed in court.

Neutral perspective regarding family dynamics. A fiduciary has the duty to act impartially and cannot act more favorably toward one beneficiary than another. The private professional fiduciary as a neutral third party can make objective discretionary decisions regarding distributions. A family member serving as a fiduciary may not be able to be objective due to long standing family dynamics.

Local. The private professional fiduciary’s office is usually located near where the administration of the trust or probate estate occurs. This is especially convenient when the beneficiaries or heirs live in other states. A family member, beneficiary, or heir who is serving as a trustee or executor may not be able to travel to where the real property is located in order to clean out the house or prepare it for sale whereas a local professional fiduciary can easily do so. Dealing with the real property held in an estate is often the biggest task facing a fiduciary.

REASONABLE FEES

A private professional fiduciary sets reasonable fees for the administration of trust matters, usually based on an hourly rate. The hourly rate compares favorably with corporate trustees which generally charge an annual percentage of the assets under management.

In probate estates, the compensation for the private professional fiduciary is set by statute. The date of death value of the estate is determined by a probate referee appointed by the court. The statutory compensation is a percentage of that value beginning at four percent (4%) on the first $100,000 of value through one percent (1%) on assets valued between $1 million and $10 million. The attorney’s fee for administration of the probate estate is calculated the same way.

LICENSING REQUIREMENTS

In order to be licensed by the State of California as a private professional fiduciary, a person must have either a baccalaureate degree of arts or science, or an associate of arts degree plus three (3) years of experience. The person must also complete thirty (30) hours of pre-licensing education in the field of conservatorships, trusts, and/or probates, and pass a licensing exam offered by the State.

A private professional fiduciary is fingerprinted and subject to a criminal background check by the California Department of Justice before a license will be issued.

AVOIDS FAMILY PROBLEMS

A private professional fiduciary avoids many of the problems that arise when a family member is serving as a trustee of a trust or the executor/administrator of a probate estate. Examples of family problems that can be avoided by using a private professional fiduciary include the following:

In a blended family where there are children from a prior marriage, there can be a conflict of interest when the surviving spouse serves as the trustee because his or her personal investment goals may be different from the goals of the deceased spouse’s children as beneficiaries of the remainder of the trust on the death of the surviving spouse. The surviving spouse may want to invest for income while the remainder beneficiaries may want the assets invested for growth.

When children are appointed as successor trustees of a trust, there can be conflicts when one child either fails to act in a timely manner or as directed by the trust, or when a child/Trustee administers the trust in a way that “corrects” a perceived unfairness which occurred during the parent’s lifetime.

Sometimes the terms and conditions of a child’s inheritances from the parents are not identical to those of one or more other children. The parents may have good reasons for making unequal distributions to their children at the death of the surviving spouse. A private professional fiduciary is useful in circumstances when a parent wants to manage a child’s inheritance over the child’s lifetime. As a neutral third party, the private professional fiduciary relieves the child/beneficiary of having to ask a brother or sister for money from the trust (which can feel humiliating for the beneficiary). In the same way, a private professional fiduciary relieves a child/trustee from making value judgments concerning the behavior of a brother or sister (which can put one child in an awkward position with the other child). Taking the management of financial affairs away from all of the children enables them to have brother/sister relationships unencumbered by such power struggles.

While a private professional fiduciary is not always the best choice for trustee or executor, under the circumstances described above, the private professional fiduciary is usually a better choice than a family member. If you want to find a private professional fiduciary, one place to look is at the website for the Professional Fiduciary Association of California which can be found at www.pfac.org.