What is a Professional Fiduciary?

July 09,2021 10:24 AM Comment(s) By Pablo

I get this question all the time and I’ve been searching for a pithy response.  The formal definition - A fiduciary is a person who assumes responsibility for a person of Trust – seems a bit stiff and unclear. 


After some thought, I’ve started explaining it this way: A professional fiduciary does what your child would do if your child was nearby, trained, experienced, objective, insured and always available.

 

That’s not a perfect definition (obviously, not everyone has children, not all my clients are senior citizens, etc.) but I think it gets at the gist.  The list of tasks differs from client to client, but it can be long and incredibly varied.  A professional fiduciary might:


Act as a professional Trustee.  In this capacity, the fiduciary manages assets, reports to beneficiaries and (often) manages the liquidation and disbursement of the Trust’s assets to beneficiaries.  This can be simple or it can get very complicated and messy.  Trusts can have multiple properties, rental income, functioning businesses, investment restrictions, complicated disbursement instructions and other complexities.


Act as a Conservator.  Regardless of how you feel about the Britney Spears case, conservatorships are a valuable structure for people who have difficulty managing daily tasks and decisions.  A Conservator might manage finances, household tasks, medical decisions and other critical tasks for their Conservatee.  The goal is to preserve, to the extent possible, the quality of life that the Conservatee wants.


Manage probate.  This encompasses the whole process of valuing and liquidating an estate, reporting to the Court and getting approval on the plan, disbursing the proceeds and reporting to all interested parties.  I know cases where fiduciaries have had to value collections of antique pipes, toy cars, ceramics and other passions.  There are also decisions around real estate, vehicles and other assets that somehow have to be divided equitably.  And that’s just the financial aspect – estates almost always have items of sentimental value that might be valued differently by family members.


All of the roles above require skills beyond any one person, so part of a fiduciary’s job is to develop a roster of skilled, ethical and reliable experts in a variety of areas: estate attorneys, investment experts, tax consultants, tradesmen, appraisers, estate auctioneers, caregivers, housekeepers, etc. 


In most cases, the benefits of bringing in a professional fiduciary far outweigh the costs, particularly in the San Francisco Bay Area, where even modest estates can be quite large because of real estate inflation.  A smart liquidation and tax strategy can save beneficiaries hundreds of thousands of dollars.  And beyond the financial benefits, having an objective third party involved can avoid hard feelings or suspicions amongst the family, which is priceless in the long run.


There are additional definitions and resources available at the Professional Fiduciary Association of California website.

Pablo

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