California Professional Fiduciary Requirements

As has been mentioned in other articles on this site, in 1990 California set up a special, registered category for “professional fiduciaries.”  These are individuals who meet many stringent requirements and can then act as fiduciaries in connection with trusts, conservatorships, guardianships and other matters.  Individuals, who were previously acting for various non-relatives, were limited on the number of persons and categories they could represent.  No limitations were placed on fiduciaries who were acting for someone related to them by blood, marriage, adoption or registered domestic partnership.

The Professional Fiduciaries Bureau was created in the California Department of Consumer Affairs.  They were to examine and license individuals to allow them to become professional fiduciaries and handle trusts, conservatorships, guardianships, powers of attorney and health care matters.

To be a professional fiduciary, the individual must meet all of the following requirements:

  1. Be 21 years of age or older.
  2. Not have committed any criminal or civil acts (defined) which would                 disqualify the applicant.
  3. Submit fingerprints for criminal check.
  4. Completed 30 hours of pre-licensing educational courses.
  5. Pass a licensing exam.
  6. Have a bachelor’s degree, associate of arts degree and three years experience, or five year experience as a fiduciary including working for a          public agency or financial institution.
  7. File an application and pay the required fee.
  8. Subscribe to a code of ethics for professional fiduciaries.

After qualifying, the professional fiduciary must renew his or her license annually and complete 15 hours of educational courses annually.  The fiduciary must submit detailed reports on clients to the Professional Fiduciary Bureau annually.

WHO CAN OR CANNOT SERVE AS A FIDUCIARY IN CALIFORNIA

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:

  1. Any attorney licensed in California.
  2. Any licensed CPA, acting within the scope of his or her practice.
  3. Any enrolled agent, enrolled with the IRS and acting within the scope of his or her practice.
  4. Trust companies.
  5. FDIC insured institutions.
  6. Public government agencies.
  7. A nonprofit corporation or charitable trust acting as trustee and handling certain charitable types of trusts.
  8. 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:

  1. 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.
  2. 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.
  3. 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.

 

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.