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How to Avoid Conflict in Your Estate Plan – Part III

Should You Hire A Professional Fiduciary?

Marilyn Simons was irate.

“I’m telling you, Bob, that estate planning attorney thinks we have raised a bunch of dummies. We have three children, all perfectly competent adults. Why shouldn’t we nominate one of them to oversee our affairs? I am quite sure none of them would object.”

Bob Simons chuckled. “Marilyn, I hardly think the attorney was suggesting that our children are incapable of handling our affairs. She was merely inquiring as to whether any of them had the time or inclination to perform the duties that might be required of them as our appointee, executor, or trustee. Think about it: Janice has five children, a husband, and a full-time job as a teacher. She is already frazzled. Bob Jr. has a dairy farm, plus a wife and four kids. That guy is up before dawn and heads to bed after sunset. His entire life revolves around that farm. It’s a wonder he had any time to make babies, much less raise them. And Laura not only works full-time, she owns her own business. She is so busy, she can’t see the forest for the trees. None of them has time to spare. How do you expect them to find the time to handle our affairs?”

Marilyn frowned. “I would think any of them would be willing to take it on. We’re their parents after all. Surely, that means something. Besides, the idea of turning our affairs over to a complete stranger frightens the bejesus out of me. How do we know that they will make the right decisions? What if they mishandle or steal our money? Then we’re stuck and our kids won’t get their inheritance. If one of our kids handles everything, I know they can be trusted.”

Bob shook his head slowly. “My darling, you are completely missing the point. First of all, if you dump this responsibility on only one child and not the others, you are going to build up a mountain of resentment. Deciding it is okay to disrupt the life of one child and not the others is just wrong. You are essentially telling that child that you value the path they have chosen less than the others. I won’t do that. Secondly, professional fiduciaries have to be licensed under California law. That means they must adhere to professional standards and their actions are monitored by the state. The chances of them mishandling anything are slim to none. As long as our instructions are clear, there is little chance of any mishap.”

Marilyn’s lips formed into a pout. “Don’t you think our children will be upset that we hired a professional over them? It’s insulting not be asked to handle our affairs. That implies we don’t think they’re capable.”

Bob sighed. “We don’t have to decide right this minute. Let’s meet with the kids and find out how they feel. But know this: I don’t want to be a burden on our kids.”

“Well, okay, Bob, let’s ask. But I just know the girls will want to take care of it for us. I am their mother, after all.”

Traditionally, most people select adult children as the trustee of their trust, the executor of their will, and/or their appointee under both their durable power of attorney and their advance health care directive. Those who do not have adult children often select another family member or a friend for those roles.

However, not everyone has friends or family members willing and able, or sufficiently responsible and reliable, to take on these roles. Moreover, in many families, putting one sibling in charge of everything causes resentment—among those chosen as well as those who were not. That’s how estates get caught up in expensive, relationship-destroying litigation. In those instances, a professional fiduciary–a person or entity that performs those duties for compensation, rather than out of a sense of family obligation or friendship—may be the best option.

Professional fiduciaries may be corporate and individual. Corporate fiduciaries are usually banks, but other financial institutions also have departments set up to take on fiduciary roles. Corporate fiduciaries offer longevity. A bank can live forever, whereas an individual fiduciary has a limited life expectancy. In a financial institution, the work gets done by individuals, but the host organization lives on. However, many corporate fiduciaries have an estate value threshold and will not take estates that do not exceed that value, whereas an individual fiduciary rarely sets such limits on his or her practice.

Individual fiduciaries can be attorneys or CPAs. They are considered qualified by virtue of their professional licenses. Other individuals who wish to serve as professional fiduciaries must become licensed as fiduciaries by the State of California. The Professional Fiduciaries Bureau, created in 2006, licenses and regulates professional fiduciaries, such conservators, guardians, trustees, and agents under a durable power of attorney for health care and finances. Requirements for licensing include passing an examination and completing 30 hours of approved education courses. In addition, licensees must earn 15 hours of continuing education credit each year for renewal of their license.

After meeting with their children, Bob and Marilyn decided to hire an individual fiduciary to handle their estate. Janice, Bob, Jr., and Laura agreed that if both parents became incapacitated or incompetent, and guardianship or conservatorship was required, they would be unable to handle the day to day affairs of their parents. They also felt that managing the family trust would create too much disruption in their daily lives.

“I think my husband would blow a gasket if I took on any more than I already have,” said Janice. “I am just barely keeping my head above water now.”

Bob, Jr., agreed. “My days are filled with cows and more cows. By nightfall, I’m ready for bed, after I carve out a few hours for the wife and kids. Taking on any more responsibility would probably put me in an early grave.”

Laura took her mother’s hand, noting Marilyn’s disappointed face and smiled sympathetically. “Mom, I know you think we should do this out of our love for you and Dad, but our lives are so busy. We don’t want to resent you and dad because we’re handling these important tasks when we are so busy taking care of our young families – your grandchildren – and our jobs. We want to remember the good times we’ve all shared together. Please, at least consider hiring a professional fiduciary. That’s what’s best for all of us.”