California law provides who can or cannot act as a fiduciary in this state. Fiduciaries include those—
Acting as executor or administrator in a probate estate
Acting as a trustee under a living or a testamentary trust
Acting as conservator of the estate and/or the person of a conservatee
Acting as guardian of the estate and/or the person of a minor
Acting as an agent under a power of attorney (general, limited or durable)
Acting as an agent under a health care form or advanced health care directive
Prior to 2007 any individual could act in any of the above capacities whether related or not to the person he or she was acting for. Because some individuals were acting like a small trust company and handling fiduciary matters for friends, they were not subject to regulation or review unless someone took them to court. Health care providers, neighbors and other non-relatives were handling fiduciary matters and sometimes stealing funds from and abusing the persons they were acting for and supposedly protecting.
California then changed the law effective January 1, 2007, under California Business and Professions Code sections 6500-6502. These sections and later regulations provided who was exempt from them and could serve as trustee, guardian, conservator, or agent under a power of attorney. No requirements were established for an executor or administrator to handle a probate estate for someone when he or she dies and anyone named or nominated for this position can act. Those who are not exempt must qualify and register as a “Professional Fiduciary.” Standards were established and persons had to be qualified and licensed by the State of California, Professional Fiduciaries Bureau, within the Department of Consumer Affairs.
Exemptions allowing someone to act as a fiduciary without qualifying as a professional fiduciary include the following:
- Any attorney licensed in California.
- Any licensed CPA, acting within the scope of his or her practice.
- Any enrolled agent, enrolled with the IRS and acting within the scope of his or her practice.
- Trust companies.
- FDIC insured institutions.
- Public government agencies.
- A nonprofit corporation or charitable trust acting as trustee and handling certain charitable types of trusts.
- Certain investment persons acting in the investment field and registered under federal or California securities laws.
In addition, an exemption was given to any person acting as a fiduciary if the person he or she was acting for was related to the fiduciary by blood, adoption, marriage or registered domestic partnership.
If a person is not related to the person for whom he or she is acting, he or she must be a registered as a professional fiduciary, with limited exceptions. The exceptions include:
- Not acting for more than three individuals at the same time as trustee, agent under durable power of attorney or health care, and agent under durable power of attorney for finances.
- Not acting for more than one individual as conservator of the person, conservator of the estate or conservator of the person and estate or guardian of the estate or person and estate.
- In counting the above, individuals related to the fiduciary are not counted. All individuals related to each other are counted as one person, all trustors (creators of a trust) related to each other are counted as one person, and the number of trusts as well as the number of beneficiaries of the trusts are not counted.
The purpose of the above was to create a field of knowledgeable and registered individuals who could legally act as professional trustees and handle fiduciary matters. They would be able to handle matters that corporate trustees did not wish to deal with and prevent other persons from preying on many elderly or infirm individuals who did not have relatives available or willing to help them.
Starting January 1, 2009, California courts could not appoint an individual who was not exempt from acting as a fiduciary or continuing to act as a fiduciary in conservatorships, guardianships and certain other matters.