WHAT IS A FIDUCIARY

WHAT IS A FIDUCIARY

A “fiduciary” comes for the Latin word “fiducia,” which means “trust.”  It is a relationship between two or more parties where one party places trust and confidence in another.  The duties of the fiduciary include loyalty and reasonable care of all assets which the fiduciary handles for his or her clients or beneficiaries.

Courts frequently examine the relationship, and scrutiny is placed upon any transaction where the fiduciary obtains an advantage or profit from the beneficiary.  Such a transaction can be voided by the court if it is the result of undue influence, or if the fiduciary took advantage of his or her position to obtain a profit, at the expense of the beneficiary.

Private fiduciaries

Fiduciaries include what may be called “private fiduciaries,” who are individuals and may or may not be related to the beneficiary.  An example would be a child as trustee of a trust for his parent or a friend as trustee for someone he has known for 30 years.

Professional fiduciaries

“Professional fiduciaries” are another category and are fairly recent.  These are individuals who are licensed and controlled by the state and offer other fiduciary services similar to those offered by banks and trust companies.  They have come into being because many banks and trust companies do not handle accounts for their clients below a large minimum value, such as a million dollars or more.  Also, many individuals, including some health care providers, have taken advantage of people by becoming trustees of their trust or by acting under a power of attorney and have stolen money or assets from them.

California determined that a problem existed in this area and decided to take action and license professional fiduciaries.  Effective in 2009, California amended the Probate and Business and Professions Code to provide the framework for licensing individuals as professional fiduciaries and also placed limitations on individuals serving as fiduciaries for non-related parties.  See the separate article on “Professional Fiduciaries.”

Banks and trust companies

Banks and trust companies are licensed either by the federal government or State of California.  They handle trusts, estates, conservatorships, and guardianships.  They do not act under powers of attorney or health care documents and cannot act as conservators or guardians of a person; they handle only  the assets of a conservatee or ward.

Public administrators, conservators and guardians

Lastly, a government agency can become involved, such as the local county “Public Administrator,” “Public Guardian,” or “Public Conservator.”

The Public Administrator is a county office and handles property and assets of a decedent where there is no other known person available or willing to do so.  The Public Administrator can also be appointed to handle the administration of a probate estate where no one else will do so.

The “Public Guardian” and/or “Public Conservator” provides services for individuals who are unable to provide for their food, shelter and clothing needs and/or to manage their assets.

Frequently, the same government office handles all of the functions listed above, particularly in smaller California counties.