What is a Professional Trustee?
WHAT IS A PROFESSIONAL TRUSTEE?
A trustee is the person (or entity, acting through an authorized individual representative) that manages trust property (also known as the trust estate). In the case of family trusts or individuals’ private trusts, the trustee usually is a private individual, either the settlor or one of the settlor’s friends or relatives (and, in many family trust situations, the trustee may be a beneficiary also).
Legally speaking, a “professional trustee” is a person who serves as a trustee:
- on behalf of three or more non-related individuals (meaning three people who are not related to the trustee by marriage, blood, adoption, or registered domestic partnership); or
- a person acting as a professional administrator, handling the practice of a professional fiduciary who has died or become legally incapacitated.
However, pursuant to Section 6501 of the California Business and Professions Code, the following persons and entities are not professional fiduciaries – even if hired to oversee or manage trust property in some capacity:
- A trust company, as defined in the California Probate Code
- An FDIC-insured institution, as well as its holding companies, subsidiaries, and affiliates
- A public agency
- A nonprofit corporation or charitable trust that satisfies certain requirements (listed in the B&P Code)
- A person who is employed by or acts as an agent on behalf of any of the entities listed above, to the extent that person is acting within the course and scope of the employment or agency relationship
- A person who acts as a professional fiduciary only as a properly registered broker-dealer, broker-dealer agent, investment advisor, or investment advisor, or as a trustee on behalf of certain companies regulated by the SEC.
PROFESSIONAL TRUSTEES MUST BE LICENSED
The California Business and Professions Code requires all “professional fiduciaries” to obtain and maintain a Professional Fiduciary license, and to comply with the licensing, ethics, and regulatory standards that govern the behavior of professional fiduciaries. A person who acts as a professional fiduciary without obtaining a license (and who is not exempt from the licensing requirement) is subject to fines, civil damages, sanctions, criminal prosecution, and other consequences and penalties.
However, licensed CPAs, lawyers, and IRS agents do not require a license to act as professional fiduciaries, if they undertake those duties as part of their professional practice activities.
Before hiring a professional trustee to manage your trust, be sure to confirm that the person or company you’re hiring is either properly licensed or exempt from the licensing requirements. Don’t be afraid to ask the question–and to require proof. If you are the beneficiary of a trust, and suspect that the person or entity acting as a professional trustee may not be properly licensed, or is violating the licensing requirements, consult a lawyer for an evaluation of the situation.
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