California “licensing is required for non-family
member professional fiduciaries who serve as … trustees for at least four non-related
trustors.” “The Professional Fiduciaries Bureau … in
the Department of Consumer Affairs … is responsible for the licensure and regulation
of non-family member professional fiduciaries, including conservators, guardians, trustees,
and agents under durable power of attorney ….
Professional fiduciaries are responsible for the property or well-being of their clients
and coordinate overall care for their client’s medical and/or financial needs. A professional fiduciary is not necessarily
an expert in all areas and may hire other persons to handle duties for the trust or
estate. However, as the ultimate decision-maker, the
professional fiduciary has the responsibility to ensure appropriate and adequate services
are provided for their client.” California currently has over 1000 licensed
professional fiduciaries. The public filed 104 complaints against licensed
fiduciaries in Fiscal Year 2016/2017. Of these complaints filed, the Bureau’s
records indicate that one complaint resulted in license revocation, one complaint in voluntary
surrender and one complaint in probation. The bureau assessed only $4000 in fines for
the referenced Fiscal Year and did not refer one person for criminal prosecution. In other words, it looks like, at best, a
consumer complaint has a 3% chance of meriting any kind of disciplinary action against a
California professional fiduciary. Is this because 97% of California consumers
who make complaints lack a reasonable basis for their complaint? Are they misguided? Ill informed? Or is it that California for-profit professional
fiduciaries epitomize professionalism and adherence to a code of ethics? Are they near-perfect in all that they do? Are they always looking out for the consumer? Or, as some consumer advocates believe, is
there a significant and glaring lack of oversight of professional fiduciaries? If so, this prima facie lack of oversight
deserves legislative review. For those who want to pursue a complaint against
a California licensed fiduciary, even knowing that there is a 97% chance that it will be
disregarded, there is a process to follow. Complaints against Professional Fiduciaries
can be made by written complaint or filed online. Whether in written form or filed online the
consumer, in the case of a trust – a beneficiary – needs to briefly describe their complaint. Consumers do not need an attorney to file
a complaint. Given the fact that beneficiaries are generally
not trained in law enforcement, accounting, trust law or fiduciary administration, describing
the wrong that they are experiencing can be a daunting task. This is certainly proven by the bureau’s
woeful 3% record in complaint enforcement. The General Online Complaint Form recites
that “The Department of Consumer Affairs is here to help Californians be careful consumers
and to protect them from unscrupulous and unqualified individuals.” So, it makes sense for a consumer to try to
describe the professional fiduciary’s wrongdoing within the context of the Department of Consumer
Affairs’ expressed mission. Webster’s Third New International Dictionary
Unabridged defines “unscrupulous” as “not scrupulous: UNPRINCIPLED.” Webster’s defines “scrupulous” as “having
moral integrity: PRINCIPLED” … carefully adhering to ethical standards: CONSCIENTIOUS….” Webster’s defines “unqualified” as “not
having requisite qualifications … (and) not limited by sensible or other qualities
or by sensible experience.” Beneficiaries, using the elements of the Department
of Consumer Affair’s mission statement, expect California professional fiduciaries
to be principled, scrupulous, adhering to ethical standards, conscientious, qualified,
sensible, and using sensible experience in performing their duties. So, how should a licensed California professional
fiduciary serving as a trustee treat the trust beneficiaries? Let’s start with the clearest statement
of the law. California Probate Code Section 16002 directs
that “The trustee has a duty to administer the trust solely in the interest of the beneficiaries.” It doesn’t say solely in the interest of
the trustee. Or the for-profit professional fiduciary. Or the professional fiduciary’s lawyer. It says: “solely in the interest of the
beneficiaries.” The enforcement of this core principle should
surely be preeminent in the performance of the Department of Consumer Affair’s mission. There should be greater legislative oversight
to be sure that this principle holds preeminence. Sadly, many fiduciaries ignore, or subordinate
the “solely in the interest of the beneficiaries” principle to a primary concern of property
over people. There are too many professional fiduciaries
who view their duty to provide for the well-being of the beneficiaries as subservient to a generally
expressed desire for “marshalling assets.” I guess that it’s easier to collect a lawnmower
and a car than making sure the beneficiary has health insurance, a decent place to live,
and provisions for care. A decedent’s dishes are prioritized over
a decedent’s beneficiary, his disabled daughter. A settlor’s son is disregarded and turned
away while the professional fiduciary focuses on spending trust money on attorneys to defend
himself against complaints of wrongdoing. Let’s get back to what the Professional
Fiduciaries Bureau says about what it does. What it should be enforcing. What is sensible. What is principled. And that is the bureau should enforce the
rule that “the ultimate decision-maker, the professional fiduciary has the responsibility
to ensure appropriate and adequate services are provided for their client.” For many trusts, this means that the professional
fiduciary is to provide for the health, education, maintenance and support for the beneficiary. This is often referred to as the “HEMS”
ascertainable standards. Too many California professional fiduciaries
ignore this. Their failure is a failure to ensure appropriate
and adequate services for their client, the beneficiary. It is time that the California Professional
Fiduciaries Bureau enforce the standard. Licensing should mean something more than
a for-profit fiduciary’s ability to charge and get paid by a trust set up for the trust
maker’s loved ones, not the paid trustee. At Hackard Law we regularly enforce trust
beneficiaries’ rights. We focus our practice in California’s largest
urban areas. We take substantial cases where we think that
we can make a significant difference and there is a wrongdoer who can be made financially
accountable for their wrongdoing or breach of duty. I’ll add – I wish that we didn’t have
to take cases against trustees who are breaching their duty to the trust beneficiaries. It costs the beneficiaries money. It has a human cost in their continuing grief. We would much rather that the trustees did
their job, that they truly be responsible for the well-being of their clients (the trust
beneficiaries) and coordinate overall care for their client’s medical and/or financial
needs. This is a better result. This is what I hope the California Professional
Fiduciaries Bureau will enforce. For those who would like to tell us their
story about fiduciary wrongdoing, call us at 916 313-3030. We’ll be happy to hear what you have to
say. Thank you.