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 that the complaint will result in 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? They are near perfect in all that they do? They always are 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.
Consumers can access the online list of California Professional Fiduciaries licensed by the State of California Department of Consumer Affairs at https://www.dca.ca.gov/consumers/public_info/index.shtml. 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 Affair’s 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 to attorneys to defend himself against complaints of wrongdoing.
Let’s get back to what the Professional Fiduciaries Bureau says 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.