What is a Fiduciary?

“Fiduciary” is not a term you hear every day. When I told my family I was going to become a fiduciary, they gave me “the look” that said, paraphrased, “I’m so proud of you. What does that mean?” Hopefully the following “Frequently Asked Questions” and answers will shed some light on how a fiduciary can assist families. Please note that I’m trying to use speaking terms rather than legalese as much as possible.

What is a fiduciary?

A fiduciary is a person who has been given authority to act on behalf of another person (the principal). A fiduciary is required to act with the highest degree of care and utmost good faith in maintenance and preservation of the principal's assets and rights.

When do people use fiduciaries?

The key term is "capacity." Fiduciaries are often brought in when the principal lacks, loses or is losing the capacity to perform some of the functions that allow them to live independently. A fiduciary may also be hired to assist a trustee under the age of 18 or an older person. In these cases, the principal may lack either the interest in or the ability to maintain a checkbook, pay their bills or operate their household.

Do I need a trust?

You should have a Living Trust with the appropriate ancillary documents (i.e. at a minimum a Power of Attorney, Pourover Will and Advanced Health Care Directive). I’ve heard many reasons why people procrastinate in getting these documents prepared. Don't hesitate to set up a trust because of something that may or may not happen in the future. Set up your trust today, under your current living situation, and know that you (the trustor) can change the terms of the trust as your life situation changes.

Without these documents your estate will have to go through the Probate Court. Simply put, the Probate process will likely cost 6 - 10% of your estate value in fees to the court and can take 9 months to 2 years to come to a distribution settlement. This does not take into account the toll on your family’s emotions during the settlement period.

Is a durable power of attorney necessary if I have a living trust?

Yes, you need both documents. Your estate attorney will have you complete a power of attorney when you prepare your trust. The same person can, and often does, serve as a successor trustee and power of attorney. A trustee manages and protects the assets in the trust. In your revocable living trust, the trustee is you (and, usually, your spouse). The powers granted in a Power of Attorney are to control things that are not owned by your trust. (Powers granted by a “durable” power of attorney continue after you lose capacity. Ordinary powers of attorney end if the principal loses capacity.) Some example powers are: banking, paying your bills, buying or selling property, filing tax returns, arranging the distribution of retirement plans and applying for benefits from SSI or Medi-Cal.

How do I get a living trust prepared?

Find an established Trust or Probate attorney in your area. I can help you with the process.

Further information on Living Trusts and Power of Attorney can be found on the The Superior Court of California - County of Orange website. Links to each subject are provided below:

Living Trusts

Power Of Attorney