Professional Fiduciaries: What They Are and Why They Are Important
One More Essential Tool in Our Aging Box
With a record number of Boomers approaching 65 in 2024, it's crucial to highlight the unique benefits of professional fiduciaries. This generation, our wealthiest yet, places a high priority on financial planning and management. A professional fiduciary can offer additional advantages even if you've already done estate planning. For instance, if you have heirs who don't get along, don't align with your aging plan, or choose not to rely on them, a professional fiduciary can act as a neutral party. They can manage your assets and affairs to align with your wishes, minimizing potential conflicts among your heirs while you are alive and after you have passed. Essentially, they become an extension of you, ensuring your financial and personal affairs are managed according to your wishes.
A professional fiduciary (PF) plays a valuable role in managing your personal and financial affairs when you cannot do so or choose not to. They are adept at handling various tasks, from bill paying and investment management to making healthcare decisions if desired or necessary. Some PFs specialize in personal care, while others focus on financial management. A PF can also handle both aspects. Unlike lawyers who provide advice, PFs make decisions based on the authority you grant them. In California, where PFs must be licensed, they can serve as conservators, medical decision-makers under a DPOA (Durable Power of Attorney), and financial managers. The key thing to understand is that PFs are guided by your pre-planned wishes.
Who Can Be a Fiduciary?
It's important to note that becoming a Professional Fiduciary in California is not a simple task. It requires a significant commitment to education and experience. To qualify, individuals must complete 30 hours of pre-licensing courses, hold at least a bachelor's or associate's degree with relevant experience, pass a thorough background check, and pass an exam administered by the Professional Fiduciary Association of California (PFAC ). These stringent requirements ensure that professional fiduciaries are well-equipped to handle complex estate planning and management tasks.
People use professional fiduciaries for many reasons: no children, estranged children, choosing not to include children and avoiding conflict among heirs now or after you pass. Professional Fiduciaries bring expertise and neutrality, reduce potential mismanagement's emotional and financial costs, and avoid legal disputes. Professional fiduciaries offer a structured, professional approach to managing complex family and financial situations.
Understand The Cost
One common concern about professional fiduciaries is the cost. However, it's important to consider the potential savings and benefits. Compared to high lawyer fees and potential family disputes, the cost of a professional fiduciary can be a wise investment. Depending on your needs, they typically charge a percentage of the estate (e.g., 2% of the first $3 million) or an hourly rate ($175/hour and up). This cost is incurred when you use the service, whether after you pass or when you need a professional fiduciary to take over your care or finances. Ultimately, they provide peace of mind by managing the estate properly, saving time, and preserving family relationships.
Maximize Your Professional Fiduciary: Top Tips
Effective estate planning involves communication that entails naming successors (always have a backup plan). Ensure key people know how the estate plan has been completed to avoid surprises and turmoil within your family. A good PF will check in annually to learn about updates and changes. Things change in our lives, and you want your plan to be relevant and practical.
Professional Fiduciaries are an underutilized resource, often unknown to many. As always, one size fits one when choosing a professional fiduciary, so schedule an initial consultation to ensure they offer all the services you need and that your personalities match up well.
Thank you to Matthew Neal, CLPF, and Mike Novak, CLPF of ProFiduciary, Inc., for their generous time educating me on the role of a professional fiduciary. Contact (619) 501-4626 www.ProFiduciary
Written by: Jacqui Clark, CSA, Editor of Aging Well Magazine
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