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By Liza Horvath


Professional Trustees


Over the last five decades living trusts have gained popularity and, in fact, these legal documents form the cornerstone of most estate plans. With the increased usage of trusts, the need for trustees has understandably increased as well. Historically, families could appoint a child to act as trustee and, if no child was suitable or available for the job, the family would appoint a trusted friend or advisor to fill this important role. Alternatively, corporate trustees - also known as bank trust departments - can be appointed to act as trustee. In instances where there is significant wealth or a complex mix of assets, a corporate trustee is often a good choice.


The beauty of a trust is that it escapes the need for court oversight but this benefit is also its biggest weakness. Friends and advisors can make good trustees but there have been many instances where “private trustees” were either ill equipped to meet the fiduciary standard or outright breached their duties. Either intentionally or due to ignorance, inexperienced trustees can easily run afoul of the law and make unsuitable investments, ignore or underserve beneficiaries or otherwise be deficient in this demanding role.


In 2007, the State of California followed many other states and enacted a law that requires non-family member “professional” trustees to meet certain requirements and be licensed by the state to act as a trustee. The fiduciary must complete certain educational requirements, pass both a state and national exam, have a background check and meet ongoing educational and information filing requirements. The newly created Professional Fiduciaries Bureau of the State of California oversees the activities of the trustee and also provides consumers on-line access to lists of licensed fiduciaries and information as to the fiduciaries’ standing with the Bureau. The site can be found at www.fiduciary.ca.gov


Regulation of trustees is a great first step and a professional fiduciary can be the perfect solution for some families. If you are considering a licensed private fiduciary, the California Professional Fiduciaries Bureau is the perfect place to start but there are further steps you should take before you decide whom to name as your trustee. Meet the fiduciary and get a sense of her experience and commitment to the profession. Ask if the fiduciary has a succession plan - if they “go” before you do, who will step in to act as your trustee? What will happen if the fiduciary dies before completing the administration of your estate – who would take over?


Also determine what sort of risk management process the fiduciary observes in their offices. This person will have access to all your assets and vital information – inquire about risk policy, how does the fiduciary handle banking or your mail? Banking access and mail are two places of weakness in many financial offices. Is the fiduciary bonded and insured? If we have a significant natural disaster does the fiduciary have an emergency plan to make sure your assets are safeguarded?


A professional can be a good option and the State regulations are a great first step – just make sure risk and contingency plans are firmly in place so your family is fully protected.

Liza Horvath has over 30 years experience in the estate planning and trust fields and is the president of Monterey Trust Management, a financial and trust management company. This is not intended to be legal or tax advice. If you have a questions call (831)646-5262 or email liza@montereytrust.com










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