September 6, 2013

Professional Fiduciary Fees

A series of articles in the San Jose Mercury News chronicled the large fees professional fiduciaries charged their clients in conservatorship matters. Since a professional fiduciary often charges at least $125 per hour for their services, many conservatees were often aghast at the lofty cost. The series of articles prompted the Santa Clara County Superior Court to modify the local rules governing professional fiduciaries in such cases. The California legislature has also weighed in on the issue, AB 1339 (Maienschein).

According to the California legislative counsel "This bill would require that when a petition to appoint a conservator or a temporary conservator is filed, and the petitioner or proposed conservator is a professional fiduciary, as defined, the petition also include the petitioner’s or proposed conservator’s proposed hourly fee schedule or another statement of the petitioner’s or proposed conservator’s proposed compensation from the estate of the proposed conservatee for services performed. The bill would provide that provision of that schedule or statement shall not preclude a court from reducing the hourly fees or other compensation."

The thrust of this bill is to provide notice to all parties of the professional fiduciaries fee schedule whereby a large fee will not materialize out of the shadows. 

For example, a conservatorship is needed for a young man injured in an auto accident. The injured victim receives a large settlement  from the at-fault party's insurance company and a conservatorship is needed to safeguard the estate. His family is unable to handle the legal responsibilities of being a conservator. Instead a professional fiduciary is appointed conservator. The professional fiduciary then goes about doing the required tasks of being a conservator. When the annual accounting is required for the conservator, the professional fiduciary notes his hourly rate, $150 per hour, and the amount of hours worked, e.g. 100. The conservator's family is completely unaware of the fee schedule because in court filings such is not required prior to the professional fiduciary's appointment. The conservator's family is then floored upon seeing that the professional fiduciary is petitioning for a $15,000 fee.  This bill would require that the professional fiduciary provide notice of their fee schedule prior to appointment so as to avoid "sticker shock" for the conservatee and their family down the line.

This bill sailed through the California legislature, a 37-0 vote in the state senate and a 78-0 vote in the state assembly. The bill now sits on Gov. Brown's desk awaiting his signature.