TL;DR (Summary): A professional fiduciary can offer expertise, impartiality, and peace of mind by managing your estate, trust, or financial matters according to your wishes. A potential higher cost of services could be a drawback to naming a professional fiduciary in your estate plan, but consult an estate planning attorney for help deciding if this is the right choice for you.

Estate planning is an essential part of preparing for the future, but what happens if you’re struggling to find a family member or friend to name as your trustee, executor, or power of attorney agent? At Goff Legal, our estate planning attorneys have often been asked: “Should I name a professional fiduciary in my estate plan?” Let’s explore what a professional fiduciary does, the pros and cons of naming one in your estate planning documents, and how to make the right decision for your unique situation.

What Is a Professional Fiduciary?

A professional fiduciary is an individual or institution you can appoint to handle your estate, trust, and financial matters when you’re no longer able to. They owe you a legal duty to act in your best interests, which is a core part of their role as a fiduciary. This means that they must always act with loyalty, good faith, and transparency.

In the context of estate planning, a fiduciary can step in to:

• Manage living trusts: Manage trust assets while you’re still alive according to your wishes.

• Handle financial matters: Pay bills, taxes, and manage investments when named as a durable power of attorney agent.

• Make medical decisions: If named as a health care agent in an advance healthcare directive, they will ensure that medical decisions are made according to your wishes.

• Act as a successor trustee: Carry out your final wishes, ensuring that debts are paid and assets are distributed to heirs. 

It’s important to note that not every professional fiduciary handles all of these areas. Some fiduciaries may specialize in one specific area; others may confidently handle both financial and healthcare tasks. When interviewing potential professional fiduciaries, be sure to inquire which types of tasks they are willing to handle to ensure they can meet your needs.

The Benefits of Naming a Professional Fiduciary

Naming a professional fiduciary in your estate plan offers several advantages, particularly if you want to ensure that your estate is handled with the utmost professionalism, neutrality, and efficiency. Let’s take a look at some of the key benefits:

1. Expertise in Estate and Trust Administration

Estate planning can be complicated. From understanding tax implications to knowing the ins and outs of trust law, managing your estate requires significant expertise. A professional fiduciary has the experience and knowledge to handle these complex matters. They’ll ensure that your assets are properly managed and distributed according to your wishes.

Whether it’s filing the necessary paperwork, communicating with heirs, or overseeing the sale of property, a professional fiduciary will know exactly what needs to be done. This can help avoid costly mistakes or oversights that could delay the process or cause conflict among your family members.

2. Neutrality and Objectivity

One of the biggest challenges in estate planning for families is ensuring that personal relationships don’t interfere with financial matters. In some cases, choosing a family member as your executor or trustee can lead to tension or disagreements among heirs. If your estate involves significant assets or complex family dynamics, a professional fiduciary can step in as a neutral third party.

By naming a professional fiduciary, you can ensure that all decisions are made with impartiality, which can reduce the risk of family conflicts and trust litigation. This can be particularly helpful if your family is large, if there are complicated relationships, or if you want to avoid putting your loved ones in a position of having to make difficult decisions about your estate.

3. Reduced Stress for Family Members

If you’ve ever been responsible for managing an estate or handling a loved one’s affairs, you know how time-consuming and stressful it can be. By appointing a professional fiduciary, you can spare your family members from this burden. They won’t have to manage your finances, make healthcare decisions, or settle any disputes related to your estate.

This is particularly important if your loved ones are already dealing with grief and loss. The last thing you want is for them to feel overwhelmed by administrative tasks at a time when they should be focusing on healing.

4. Ongoing Management for Complex Estates

Some individuals or couples have assets that require ongoing management, such as real estate investments, business interests, or charitable foundations. A professional fiduciary is trained to handle these types of assets over the long term. If you have a complex estate with assets that need ongoing management, a professional fiduciary is a valuable resource.

A professional fiduciary will have the systems in place to handle ongoing investment management, pay bills, and provide regular updates on your estate. They can also ensure that any income generated from your estate is appropriately distributed according to your instructions.

5. Accountability and Transparency

A professional fiduciary has a legal obligation to act in your best interests. They must follow the instructions you outlined in your estate plan and manage your assets responsibly. This legal responsibility means they are more likely to handle your estate with a high level of integrity and transparency than a subpar trustee or agent.

Additionally, if you appoint a professional fiduciary, your heirs or beneficiaries can have greater confidence that the estate administration will be carried out fairly and according to your wishes, reducing the risk of legal conflict. If there are concerns or questions about the process, they can also seek a third-party review or advice from other professionals.

Potential Drawbacks of Naming a Professional Fiduciary

While there are many benefits to naming a professional fiduciary, there are also some considerations to keep in mind before making this decision.

1. Cost of Services

One of the main downsides of hiring a professional fiduciary is the cost. Professional fiduciaries typically charge fees for their services, which can vary depending on the complexity of your estate and the services provided. These fees can be based on an hourly rate or a percentage of the estate’s value.

While the cost is often justified by the expertise and peace of mind they provide, it’s essential to factor this into your estate plan. And don’t forget that family members may also charge for their time as well. Be sure to discuss the costs upfront when meeting with potential fiduciaries so you have a clear understanding of what will be expected.

2. Loss of Personal Connection

One of the reasons people often choose family members as fiduciaries is that they have a personal connection to the individual and understand their values and wishes. A professional fiduciary, while competent, might not have the same level of familiarity with your personal preferences or the family dynamics that could influence decisions.

For example, if you want to ensure that certain family members receive specific sentimental items or if you want to set up charitable giving, a professional fiduciary may not fully understand the emotional significance of your wishes in the same way a family member might. It is important to make sure you share your wishes and what is important to you with your fiduciary so they can understand your values and intentions. 

3. Potential for Misalignment with Family Members

While professional fiduciaries are neutral parties, there is a chance that some family members may feel uncomfortable with the idea of a non-family member managing their inheritance. They may feel that a trusted family member would better understand their needs or wishes. This can be an issue if there are complex relationships or if a family member feels overlooked or underrepresented. A family meeting can help set up your beneficiary for success when working with a fiduciary. 

How to Decide Whether to Name a Professional Fiduciary in Your Estate Plan

Now that you understand both the benefits and drawbacks of naming a professional fiduciary, how do you decide whether it’s the right choice for your estate plan? Here are a few key factors to consider:

1. Complexity of Your Estate

If you have a simple estate with just a few assets, naming a family member or close friend as your fiduciary may be sufficient. However, if your estate includes investments, business interests, multiple properties, a special needs trust, or if you want to ensure that your estate is administered according to very specific wishes, a professional fiduciary can provide the expertise needed to manage it.

2. Family Dynamics

If your family relationships are complex or if there is a history of conflict, a professional fiduciary can help ensure that decisions are made fairly and impartially. This is particularly useful when you don’t want to burden any one family member with the responsibilities of managing your estate.

3. Desire for Neutrality

If you want someone who can act objectively and neutrally without getting emotionally involved, a professional fiduciary is the best option. They will focus on the tasks at hand and ensure that everything is done according to your instructions.

4. Financial Resources

If you have the financial means to afford a professional fiduciary’s services, and you want the peace of mind that comes with knowing your estate will be managed professionally, this can be a wise choice. Consider how much you’re willing to invest in the administration of your estate versus the potential benefits of having someone with specialized expertise.

Contact Goff Legal to Get Started

Deciding whether to name a professional fiduciary in your estate plan is a personal decision that depends on your unique circumstances. A professional fiduciary can bring expertise, neutrality, and peace of mind to the administration of your estate, but it does come with costs and may involve a loss of personal connection with your assets.

Ultimately, it’s important to weigh the pros and cons and consult with an experienced estate planning attorney to determine what’s best for you and your family. At Goff Legal, we’re here to help guide you through every step of your estate planning journey. We also have relationships with numerous pre-vetted, top-quality professional fiduciaries if you’re seeking a trusted referral.  If you’re wondering, “Should I name a professional fiduciary in my estate plan?”, contact us today for a free discovery call to get started.

FAQS:

1. What qualifications should I look for in a professional fiduciary?

When selecting a professional fiduciary, look for someone with relevant qualifications and expertise. Common qualifications include:

• Licensing and Certifications: Look for a licensed professional fiduciary; you can look up and verify their license using this license verification tool.

• Experience: Choose a fiduciary with experience in managing estates similar to yours, especially if your estate is large or involves complex assets.

• Educational Background: A background in finance, law, healthcare, or accounting is often beneficial, as these professionals understand estate laws, tax implications, and financial management.

• Good Standing: Ensure they are in good standing with relevant professional associations, such as the Professional Fiduciary Association of California (PFAC).

2. What qualities matter most when choosing a professional fiduciary?

While qualifications are important, certain qualities will ensure your fiduciary can fulfill their duties effectively:

• Integrity: A fiduciary should be trustworthy and act in your best interests, as they have a legal and ethical duty to do so.

• Communication Skills: They must be able to clearly communicate with your family, beneficiaries, and other professionals involved in your estate planning.

• Attention to Detail: Estate planning involves complex legal and financial matters. A good fiduciary will be detail-oriented to ensure that nothing is overlooked.

• Impartiality: A professional fiduciary should be neutral, without any personal biases or emotional involvement that could affect decision-making.

• Organization: Estate management often involves numerous documents, financial accounts, and tasks. An organized fiduciary can keep things running smoothly.

3. What are some red flags when choosing a professional fiduciary?

There are a few red flags to watch for when considering a professional fiduciary:

• Lack of Transparency: If the fiduciary is vague about their fees, services, or past experiences, it may indicate a lack of professionalism.

• Conflicts of Interest: Be cautious if a fiduciary has any potential conflicts of interest, such as being related to one of your beneficiaries or having a financial stake in your estate.

• Unclear References or Reviews: If the fiduciary cannot provide solid references or reviews from clients with similar estates, this is a cause for concern.

• No Formal Licensing: If the fiduciary is not properly licensed or registered with relevant regulatory bodies, this could lead to complications down the road.

• Pushiness: A fiduciary who is overly eager to get your business or pressures you into making decisions quickly without giving you the chance to consider your options may not have your best interests at heart.

4. What questions should I ask when interviewing potential professional fiduciaries?

To find the best professional fiduciary for your needs, ask the following questions:

• What is your experience managing estates of my size and complexity?
  This will help you assess their expertise in handling similar situations.

• Are you licensed or certified in fiduciary services?
  Ensure they meet the legal and ethical standards for fiduciary duties.

• How do you charge for your services?
  Get clarity on fees—whether hourly, flat-rate, or percentage-based—and understand how the fees will be structured.

• Can you provide references from clients with similar estates?
  Check their reputation by hearing from previous clients or professionals who have worked with them.

• How do you ensure impartiality in your decisions?
  It’s important to know how they handle potential conflicts of interest and maintain neutrality when working with family members or beneficiaries.

• How do you communicate with family members or beneficiaries?
  This will help you understand their approach to keeping your loved ones informed during the process.

By asking these questions, you can ensure that the fiduciary you choose is the right fit for your estate planning needs.