If you’re over 50, child-free or childless, and getting ready to retire, then you’re in a big club – about 15 million to be exact1! U.S. Baby Boomers, the ones who make up this huge contingent, are getting older, and the truth is that many of them never had kids. This leaves these “Solo Agers” with one big unanswered question: “Who will take care of me?”
While all of us hope to eventually retire and manage to sustain an affordable, desirable lifestyle while aging gracefully, the reality is that almost everyone comes to rely on others for help at some point. For Solo Agers – those who consciously choose (or not) to forgo either partnership, raising children, or both – determining who can provide support later in life (if needed) is of special concern.
Why Solo Agers Might Consider a Professional Fiduciary
One of the classic difficulties for a Solo Ager is naming individuals in their estate plan to manage critical finance (attorney in fact, power of attorney, successor trustee) and healthcare (health agent) support roles. While friends, relatives, or business associates can be named to fill these roles, the average person is typically ill-equipped to tackle the nuances and complexities of that these roles require.
Historically, the Professional Fiduciary (PF) served a unique role for seniors, people with disabilities, and children. A PF can coordinate services such as daily care, housing, medical needs, and handle financial management services. Recently, as the number of Solo Ager’s has increased, PFs are proving to be a critical resource in states where they are licensed (currently California and Arizona, although the Uniform Law Commission has proposed model legislation that could be enacted in many more states to enable the wider licensing of professional fiduciaries, guardians, and conservators)2.
There are many reasons why a Solo Ager would choose to work with and designate a PF in their critical estate plan roles. The first is that Solo Agers do not have a default safety net of stewardship; they must be deliberate about finding someone to support them as they age. Finding that person or set of people may be difficult. The person must be in the right age range (a generation young is ideal), must understand the unique circumstances of one’s day-to-day situation, and optimally, be local. They also need to be able to handle financial responsibilities. And that person must understand and commit to honoring the wishes of the Solo Ager.
Moreover, many of us don’t want to burden those we love and trust with all or even some of these responsibilities. Therefore, choosing a PF can make perfect sense.
The Five Core Responsibilities of Professional Fiduciaries
While PFs provide a varied range of services, the essence of their job description boils down to 5 core duties:
- Care: Understanding the needs of the solo ager as completely as possible to exercise sound judgments that protect a beneficiary’s interests.
- Confidentiality: Maintaining confidentiality of all related information.
- Loyalty: Acting in the best interest of the solo ager and not in their own self-interest.
- Obedience: Acting within the law to advance the interests of the solo ager.
- Accounting: Administering matters and making decisions concerning the Solo Ager with the highest degree of professional skill, caution, and critical awareness of risk.
When a solo ager partners with a PF, all these areas are expertly addressed, and the stress of aging and all that comes with it is greatly reduced.
Points to Consider When Hiring a Professional Fiduciary
Once you decide to hire a PF, there are a few major “scope” items to consider.
- First, they don’t initially do anything. Naming a PF as your power of attorney and/or health care agent in your estate plan designates them to perform in those roles later, and only if needed.
- Second, most PFs can perform both financial roles (such as power of attorney) as well as non-financial roles (such as health care agent, making health care decisions for you if you are unable). If you are naming friends to perform these roles for you, it is typical that the same person might not be the best choice in both roles.
- Third, PFs are legally placed in charge if they are needed. That means they are making critical decisions for all your possible support needs and are legally enabled to do so. Although they don’t typically manage investment assets (that is generally the jurisdiction of a fiduciary investment advisor professional, such as Johnson Lyman Wealth Advisors), they would make the call on who to hire (and fire) to do so.
You can see that choosing the right PF is a critical decision. Therefore, it is important to meet and interview PFs to find one that shares your values and understands your key concerns. Even better, consider putting key policy desires in writing and share them with your chosen PF in advance. This empowers them to really make the best decision for you if they are placed in that position.
How to Find a Professional Fiduciary in California
Feel free to ask around and tap into your network. Your Estate Attorney or Financial Planner may have experience with specific PFs and should be able to provide a recommendation. If not, the internet is at your fingertips – there are great resources out there to support your search such as:
And when you’ve found a list of PFs you’re ready to contact, you can use this resource for interviewing each of them. This document is provided by the California Department of Consumer Affairs (DCA) and provides a range of questions to ask a PF before retaining them. It’s important to interview multiple PFs to get a sense of whether they are competent, trustworthy, and whether you would work well together.
How Professional Fiduciaries Get Paid
It’s important to understand how PFs get paid. In general, two models exist:
- On an Assets Under Management (AUM) basis.
- Hourly for the services they provide.
Which model works best for you depends upon the nature and extent of the relationship between the PF and you. Some prefer AUM-based fees, which can be more expensive over time but offer a known, up-front cost and can keep costs under control if you need a lot of support. Others choose to go with PFs that charge an hourly rate for the time they spend in supporting you. This can be more expensive in the short-term but may cost less over time, as it allows the client to pick and choose from service options.
Consider Adding a Professional Fiduciary to Your Support Team
The length and quality of our lives are somewhat of an imponderable. However, it is easy to see that putting in a bit of effort to create a support system that can jump into action if you need help later can pay immense dividends. Part of that plan should include consideration of using a PF.
Our firm, Johnson Lyman Wealth Advisors, works with Solo Agers using a comprehensive Solo Aging Support System that we’ve created and fine-tuned by working with many Solo Agers over the years. Part of this framework is to create appropriate support systems for each of our clients, which often include a Professional Fiduciary.
Schedule a call with us to discuss your concerns and how our Solo Aging Support System can help
References
1 Tayelor Valerio, Brian Knop, Rose M. Kreider, and Wan He, U.S. Census Bureau, Current Population Reports, Page 3, Childless Older Americans: 2018, U.S. Government Printing Office, Washington, DC, August 2021
2 Blaine F. Aikin, Investment News, “What you need to know about professional fiduciaries”, June 3, 2019.
Disclosure
This material was prepared by Johnson Lyman Wealth Advisors from information derived from sources believed to be accurate. This information should not be construed as investment, tax, or legal advice.
