The Life Transition Blog
What is a Professional Fiduciary?
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You probably know an older adult who is all alone. Perhaps this person is single, widowed, or divorced. Maybe he never had children or is estranged from them. Possibly her siblings have all passed away. Whatever the reason, it is often difficult for individuals in this situation to decide who to appoint as their power of attorney or health care surrogate in the event they can’t make decisions for themselves. All too commonly, these folks simply avoid completing appropriate documents and then are stuck if they lose capacity.
In other cases, there is plenty of family who could take over if needed, but they live far away or are fully committed to their own professional and personal responsibilities. Often, family is willing but not able. That is, they would not be a good choice to step into our shoes due to the lack or appropriate skills or the potential for conflict with siblings or other relatives. Perhaps a wife is concerned about her husband being the successor Trustee to their trust because he is a wonderful artist but not interested in finance.
Enter the professional fiduciary. A fiduciary is a person who assumes responsibility for a position of trust. Fiduciaries can serve by court appointment or by private agreement. Court appointed fiduciaries are known as guardians or conservators. In addition, personal representatives of estates are appointed by the Court. Fiduciaries serve by agreement as daily money managers, trustees, representative payees, or as agents under financial or health care powers of attorney. A fiduciary can be an individual or a corporate entity like a bank’s trust department.
Professional fiduciary services range from those that are less restrictive to those that essentially have the professional step into the shoes of an incapacitated person. It is almost always best to start with the least restrictive alternative, allowing the older adult to retain as much independence and decision-making authority as possible.
The least restrictive type of professional fiduciary is the Daily Money Manager (DMM). They handle day-to-day finances and can be retained by the person who needs the assistance or by a family member serving as Agent under a Power of Attorney. DMMs often serve as the eyes, ears, hands and feet of the older adult, allowing them to retain maximum control of their own affairs.
Next along the continuum are professionals who serve as Agent under a Power of Attorney or Health Care Surrogate document, or who serve as Trustee under a trust. These arrangements must be made in writing while an individual has the legal capacity to make such an appointment, even if the services of the fiduciary will not begin until the individual lacks capacity. There are restrictions (which vary by state) regarding who may serve as a professional Agent or Trustee. The responsibility of the fiduciary in these situations is to carry out the instructions in any written documents (e.g., trust, POA, Advance Health Care Directive, etc.) or, where appropriate and allowed by law, to use substituted judgment or the best interest standards to handle the incapacitated person’s affairs.
The most restrictive fiduciary arrangement is guardianship (known as conservatorship in some states). Guardianship is a legal tool to provide management for the financial and/or personal affairs of individuals deemed by the court to be physically or mentally incapacitated. The Guardian or Conservator is legally appointed to manage the incapacitated person (or ward’s) property and/or person and all aspects of the guardianship are overseen by the court.
The best way to ensure that your affairs will be handled the way you prefer is to work with an attorney to draft appropriate documents and then keep them up to date. In the event you find yourself or a loved one in a situation where this hasn’t been done or where those named in the documents are unable or unwilling to serve it is wise to consider engaging a professional fiduciary.