What is a professional fiduciary?
A fiduciary is someone you trust to manage your affairs for you. The word is used to describe someone who serves as a trustee, executor or agent for you. It is difficult to describe the job because a fiduciary can play as limited or as broad a role as you need, and the role often changes over time. These are some common tasks you might give a fiduciary:
- Manage your financial assets. This could be as simple as making sure your regular bills get paid on time, or it could be as involved as monitoring your investments and planning for your taxes.
- Manage your real estate investments. Investment properties can generate impressive cash flow, but they require significant attention. Property managers may not be enough. They will interact with tenants for you, but they usually do not help maximize your overall return from your real estate. A fiduciary will do that for you.
- Run your trust. If you have already worked with an estate planning attorney to create a trust, then you know that the single most important decision in estate planning is making sure you have designated a trustee who is up to the challenge. Family members or friends may not have the skills, the experience or (most importantly) the time to manage your trust. A professional trustee is uniquely suited to that job.
- Make medical decisions and manage your health care. A professional fiduciary can assist your health care decision makers by listening to and questioning your health care providers independently and providing a neutral opinion. Often times, it works best to have a professional fiduciary as your health care decision maker with the understanding that he or she should consult with your other family members but should ultimately make decisions based on your desires.
A professional can manage family tensions.
Family dynamics tend to intensify when the head of the family becomes unable to or uninterested in managing the family affairs. Childhood sibling rivalries often resurface. Many times, family members begin to struggle with each other at exactly the time when the family should pull together. When emotions run high between family members, financial and medical decisions become difficult to make. The immediate problems are obvious, but these tensions can also destroy family relationships for generations to come.
Because professional fiduciaries have no personal stake in the situation, they can keep your affairs running smoothly while they mediate family tensions to prevent long-term damage.
If you have no family members (or trust none of them), a professional fiduciary is perfect.
Family members and close friends are often a person’s first choice when they need help. But if you do not have family members or close friends who are up to the job – or if you do not trust any of them to do the job properly – then a professional fiduciary may be your best solution. A fiduciary will get to know you and your goals and will work to protect you and your assets based on that knowledge. A fiduciary can become your strongest advocate.
How are individual fiduciaries different from trust companies?
Professional fiduciaries provide services similar to those of a trust company, but there are some significant differences:
- Unlike professional fiduciaries, trust companies will not assist with medical decisions.
- Trust companies often remove existing financial and tax advisors and bring assets “in house” for management, while professional fiduciaries seek out independent financial advice. They usually try to work with your existing advisors because their knowledge of your likes and dislikes provides continuity in your affairs.
- Trust companies often refuse to get involved if your investments are highly concentrated, while professional fiduciaries will work with your preferred investment vehicles if possible.