Wednesday, June 24, 2015
Types of Professional Fiduciaries in Oregon Guardianship and Conservatorship Cases
Family battles over inheritances are the stuff of great novels. In the courts, however, the family battles over the appointment of a guardian or conservator can be as contentious and difficult as any will contest. The cases arise because there is an elder who is alleged to need help in managing care or money. Sometimes the battle arises because the elder has lawyered up and opposes the appointment of anyone to take charge of his or her affairs. More commonly, however, these conflicts end up in the courtroom because the children of the elder are battling each other for position and control within the family. Whenever squabbling siblings are at the center of the dispute someone will propose that a professional fiduciary be appointed. (A fiduciary is someone who works for the benefit of another, and I use the term here to mean the person nominated to serve as a guardian or conservator.) Court visitors are fond of this option, and judges—who often want quiet as much as they want justice—often prefer appointing a professional to sorting out the conflicting accusations of the elder’s children.
Professional fiduciaries come in a variety of shapes and sizes. At one end of the spectrum are the trust departments of large financial institutions. Most bank and investment houses have a trust department that will serve as fiduciary for grandma if the money is right. The banks are neither uniform nor transparent about how much they charge for these services, but you should not expect a financial institution to accept your case unless grandma has at least half a million. Each year, these fiduciaries charge a percentage of the amount being managed. A common charge is two percent of the value of the trust per year. Thus, if you put in the minimum amount of $500,000, the bank will charge at least $10,000 for managing grandma’s money. They may charge additional fees for financial management and investment advice. Bank trust departments and dedicated trust companies claim great skill in managing money and bringing in large returns. These claims had more weight prior to the recent recession. In any case, they employ professional money managers and produce long incomprehensible quarterly statements of profit and loss.
There is some question these days whether actively managed investments can ever return more than computer managed index funds, particularly when the manager is scraping off at least two percent every year for his efforts, but that is a subject for another post.
Banks have special exemption that allows them to be serve as a trustee of trusts without a court order or court oversight. Thus, the banks and investment houses occupy the world of large trusts, more so than the world of guardians and conservators.
The next candidates for the job of professional fiduciary are fiduciary firms. These are small businesses, usually partnerships or sole proprietorships, made up of social workers with a head for bookkeeping. They can serve as guardian, conservator, or both. The firms consist of one or more certified professional fiduciaries and a staff of case workers, bookkeepers, and office professionals. These folks are always appointed by a court, and specialize in attempting to both protect the elder and stabilize the battling family. They manage money by stopping the bleed out to greedy relatives and attempting not to lose it thereafter. They are more likely to leave the elder’s money with the people who are currently managing it than to take up active management of investments. What they do well is protect the elder’s physical well being and make sure the elder’s money does not disappear.
This group of professional fiduciaries gets paid by the hour rather than by commission. The partners tend to charge about a hundred dollars an hour with case workers and office staff charging substantially less. Their charges must be court approved.
The last rung on the ladder of professional fiduciaries consist of sole practitioners. These folks are certified professional fiduciaries who practice out of their homes or out of small offices. They may contract with case workers and even have a small office staff, but when you get one of these you are depending on the skill of the person appointed to serve, not on a functioning bureaucracy. They are not money managers and don’t pretend to be. They are social workers willing to protect the elder's money. These people are the most “hands on” of the bunch and are likely to have the most interaction with the families. This intimacy is good if you get along with the fiduciary and not so good if the relationship goes sour.
Every professional fiduciary comes with a lawyer. Professional fiduciaries develop relationships among elder law lawyers and use the same two or three lawyers whenever the can. They refer work to their favorite lawyers and those lawyers refer work to them. Lawyers and law firms have personalities. Some firms are grumpy; some are friendly; some are humble; and some are pompous. If you are considering inviting a professional fiduciary into your family, it is worthwhile inquiring who will be doing the legal work.
Professional fiduciaries also have reputations for being good at certain kinds of cases. Some work hard to bring fighting families together; others are known for being tough and whipping misbehaving families into line. Some are great at forensic accounting, and others are good at locating publicly funded social services. It can be hard to tell what kind you are getting. Online reviews are useless, because no matter how skilled and compassionate the fiduciary is, at least half of his or her clients are going to hate her. The haters write the online reviews. The best bet is to have an elder law lawyer you trust recommend someone. Your lawyer is likely to recommend someone he or she likes, but because the lawyer knows several different fiduciaries, this biased recommendation is better than none at all.
Once a professional fiduciary has come into your family, you might as well accept that the fiduciary will be there until the elder dies. Courts who find a family so dysfunctional that a professional is warranted almost never turn around and rule that the professional is no longer needed. If you truly need to get rid of a professional, consult the article I wrote on the subject here.
Another concern about professional fiduciaries is that they tend to favor the party that selected them. When I am trying to recruit a professional fiduciary for a case, I sell my case in the same way that clients sell their cases to me. I explain how this is an easy case with plenty of assets to pay their fees. If the fiduciary likes the case, and thinks I may well bring more just like it in the future, the fiduciary is going to make close call decisions that favor my side. That is a fact of life. The fiduciary is going to answer my calls a lot faster than the calls from the lawyer who opposed his or her appointment. If you have a choice, it is better to be from the side of the family that supported the appointment of the fiduciary than from the side that opposed it.
Having a professional fiduciary managing the care of grandma can be a blessing or a curse. I have seen a relationship between a mother and children destroyed because the children were put in charge of her money, and then repaired when the children turned the job over to a professional. On the other side, I have seen fiduciaries trample family feelings and run roughshod over existing family systems in pursuit of some mythical “best interests” of the elder. There is a saying the social service world that a “barely adequate” family member produces better results when it comes to care taking than does a well trained professional outsider. Professionalism has its advantages and its dark side. When considering a professional fiduciary a family must balance risk and reward; not an easy thing to do when enmeshed in the high emotions of a protective proceedings.