How to Find a Professional Fiduciary
By Patricia Louise Nelson
Frequently as part of the estate planning process, my clients need to select a professional fiduciary to serve as trustee of their revocable living trust, or as personal representative of their probate estate, or both. Generally speaking, there are two categories of professional fiduciaries: banks and others. There are pros and cons of either option. With either option, you get the benefit of a neutral third party, who has no history with your family, who is detached and objective. These people are professionals.
On the “pro” side, banks generally bring an exceedingly high level of competence and expertise to serving as professional fiduciaries. Banks need less support and guidance from their attorneys, so the attorney fees are less than those incurred by an individual fiduciary, especially an individual who is a family friend and has no experience with the duties of being a fiduciary. Banks are often equipped to handle unusual assets, like real property that could be contaminated by hazardous waste. Banks virtually never disappear or die, so they offer consistency and predictability.
On the downside, banks are generally more expensive than an individual in that they charge a percentage of the value of the trust assets every year they serve. The percentage is generally between 1.4-2.0% per year. Bank often require the value of the trust assets exceed a certain value (often $500,000 or $1,000,000) before they are willing to serve. So, banks bring dependability and expertise at a predictably higher cost.
On the plus side, individuals or small companies often cost less if they charge an hourly fee for their services. Be sure to ask these professional fiduciaries for their fee structure, as some non-bank professional fiduciaries charge a percentage like a bank. In my opinion, this is unnecessary and inappropriate profiteering. If individuals offered the same level of hyper-expertise as a bank, I could see them reasonably charging a percent of the assets for their services. I have yet to find an individual or small company that justified charging a bank’s fees, in my opinion.
On the “con” side, individuals sometimes die or the small company dissolves. I recommend that your documents include a provision for how to replace a “missing” professional fiduciary. So, individuals or small fiduciary companies may save you money, but they may also not be around when you need them.
Our office has a list of professional fiduciaries we prefer. Sometimes there are professional fiduciaries who are not included on our list. Please ask us if we are aware of them. If we are, and they are not on our list, there is a good reason for that, which we will likely not be willing to share with you.
