What is a Professional Fiduciary?

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Elder law attorneys urge the public to get their affairs in order, but it is difficult for individuals without immediate family to decide who to appoint as their power of attorney or health care surrogate. All too often, these individuals avoid completing the appropriate documents, leaving them in an extremely vulnerable position should they lose the capacity to manage their medical and financial affairs.

Ironically, a senior with plenty of family support may find themselves in a similar predicament. There might be loved ones who could take over if needed, but they may live far away, lack the appropriate skills, or bring a potential for conflict with siblings or other relatives. Family may be willing but unable or ill-prepared to fill this important role.

In either case, what is a person to do in order to take charge of their legal, financial, and medical future? A professional fiduciary may be the solution.

What Is a Fiduciary?

A fiduciary is a person who is named in a private agreement or by a court to assume responsibility for a position of trust. Fiduciaries handle affairs on someone else’s behalf while they are still alive and/or after they have passed away. For example, a representative payee for a loved one’s Social Security benefits and an executor for a decedent’s estate both serve in a fiduciary role.

There are a number of different kinds of fiduciary relationships. Each comes with unique duties and involves a certain amount of restriction for the person who requires representation (usually known as the principal, ward or beneficiary). A fiduciary can be an individual or a corporate entity like a bank's trust department.

Professional Fiduciaries

Most people wish to select the person who will be entrusted with managing their affairs; that is why power of attorney documents for finances and healthcare exist. They allow individuals to appoint someone they know and trust (an agent) to make decisions on their behalf so that a stranger does not assume this very personal responsibility. But, as mentioned above, in cases where a senior does not have a person to appoint, a professional may be the best bet. Individuals who serve as professional fiduciaries tend to be trust company officers, certified public accountants, or attorneys. In selecting a professional fiduciary, be certain the agent has appropriate certifications and experience in this area of expertise.

Regardless of whether a fiduciary is a spouse, a trusted friend, an adult child or a professional, this individual must act within the legal authority granted to them and in the best interest of the person they are representing. Breach of fiduciary duties is taken extremely seriously. While it may seem unnerving to appoint someone you do not know, professionals in this line of work must follow a strict code of ethics and are typically regulated by individual states.

One of the biggest benefits of hiring a professional fiduciary is the ability to avoid family conflict. For example, parents often wish to name a child as their agent, but in cases where there are multiple children, squabbles over decisions and who holds the power to make them can get ugly. Appointing multiple individuals to serve as co-agents can make things even worse. A professional fiduciary lends objective legal and financial expertise while ensuring that a person’s affairs are taken care of without added drama.

How Are Professional Fiduciaries Appointed?

An elder who would like to appoint an impartial individual to manage their healthcare and/or finances can name a professional fiduciary in their power of attorney documents. In instances where a senior failed to name any agent to act on their behalf prior to becoming incapacitated, or in cases where an already appointed agent is misusing or abusing their position, guardianship (also known as conservatorship) proceedings will ensue. This lengthy and expensive process can result in a court-appointed professional fiduciary who will handle the senior’s affairs.

How Much Do Professional Fiduciaries Charge?

Much like an attorney or financial adviser, professional fiduciary costs vary widely depending on the complexity of an individual’s case and the types of services needed. If a senior is still competent and capable of naming a professional in their POA documents, then both parties should meet and a fee agreement will be provided describing all charges for the services needed. No money changes hands until the fiduciary actually begins providing services, which may be many years from the time the agreement is signed. When a professional is appointed through guardianship or conservatorship proceedings, fees (usually hourly) are presented to and approved by the court. In both cases, fees are paid out of the senior’s estate.

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 keep them up to date. In the event you find 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 hiring a professional fiduciary.

Sheri Samotin brings more than 30 years of business and management experience to LifeBridge Solutions. She is a Certified National Guardian, Certified Daily Money Manager & Certified Professional Coach. She is the author of Facing the Finish: A Road Map for Aging Parents and Adult Children.

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7 Comments

In my experience, Private Fiduciaries, and daily money managers, are running a private business to make money, therefore, the temptation to take advantage of those who cannot fight back is large. A private fiduciary and or private daily money manager for the elderly is something I strongly advise against, in my opinion, and experience. Elderly people are the "Geese with the Golden Eggs" for private fiduciaries. Just ask my sister who has lost everything, including her pride, due to a greedy and hostile private fiduciary.
As a Daily Money Manager and someonone who acts as a fiduciary to those in need, I heartily agree that checks and balances should be in place. It is always most successful for the client when no one is acting on their own and a team of professionals (and family, if able) are in place to support the elder and prevent abuse.
Amy Jo Neill
Daily Money Manager and Private Fiduciary
Member of AADMM since 2011
You are wise to put a team in place now that you trust and that will be there to assist when and if you should need it. I recommend looking for a Daily Money Manager in your area. I service the New York tri-state area. Several DMM's are insured to serve as a fiduciary should the need arise.
Amy Jo