by Wendell Cayton

Megan bounced around my office like a tennis ball with blond curls while her parents and I discussed their simple estate plan. They both wanted enough life insurance to ensure that the survivor would be able to continue life comfortably. However, the stumbling block in the plan came when I noted that they would have to set up a trust for Megan should both parents die.

Minors require a guardian in the event of the death of both parents. If the child has an inheritance, such as would be the case for Megan, a trustee is required to manage the assets. The guardian of the person can also be the trustee; In this case, however, Megan’s parents were having trouble. But, if Megan’s parents fail to appoint a guardian, the probate court will do it for them, without regard for their wishes.

Her aunt could be her caretaker, but the aunt was not capable, in the parent’s judgment, of managing Megan’s inheritance. A simple solution in this case was to appoint a private fiduciary as the trustee of a testamentary trust established by their will when they die. In our well-dispersed society, close family members may not be readily available or appropriate for the role of a fiduciary. Naming a private, professional fiduciary can solve this problem.

A private fiduciary is a person who assumes responsibility for various positions of trust. This person may serve as a guardian for minors if both parents are deceased. A fiduciary may act as the trustee for either a revocable or an irrevocable trust. Fiduciaries also may serve by court appointment as conservators, personal representatives of estates, or as agents under powers of attorney.

According to Rowdan Davis, chairman of the South Bay Chapter, Professional Fiduciary Association of California, private fiduciaries provide personal, hands-on alternatives to naming a more impersonal bank trust department to such a role. He noted that a private fiduciary would usually make an effort to meet the family beforehand and take a more personal interest in the situation.

Private fiduciaries also perform important roles in conservatorship situations. A conservatorship is a legal tool to provide management for the financial and/or personal affairs of individuals determined by the court to be physically or mentally incapacitated.

The private fiduciary may act as a conservator of the person, acting to assume responsibility for decisions regarding the health and welfare of an individual who had been determined by a court to lack sufficient understanding or “capacity to make or communicate his or her daily living needs.”

If that person cannot manage his/her personal assets, a private fiduciary may be appointed and empowered to do so. In this case, the fiduciary—acting as a conservator—can receive income, pay obligations, manage property, and see that appropriate tax returns are filed.

State statutes govern private fiduciaries. For instance, in California, each county has a probate court as part of its court system. These courts may appoint a private fiduciary as a neutral third party to protect vulnerable and incapacitated people from abuse, neglect, and exploitation.

The costs for their services are set by the individual fiduciary, or in some cases, determined by the courts. Costs are usually set as hourly fees or some percentage of the assets being managed.