State approved: who's required to be licensed as a professional fiduciary?

• Author: Counts, James C., II
• Position: Professional issues

Are you preparing income tax returns and advising individuals who are required by California to be licensed as a professional fiduciary? As of Jan. 1, 2009, certain fiduciaries were required to be licensed by the California Professional Fiduciary Bureau. This requirement came about from a series of articles by the Los Angeles Times in 2005 that identified problems with many serving as fiduciaries. Because of these problems, the California Legislature took up the issue and passed the Professional Fiduciary Act.

This article is to assist you in understanding who is required to have a California Professional Fiduciary license.

Who Doesn't Need a License?

As tax professionals, we prepare income tax returns for trusts and estates, along with advising the fiduciaries. When performing these services we need to be aware of the issue of whether the fiduciary needs to be licensed.

The Professional Fiduciary Act [PC Sec. 6501(f)(4)] defines certain groups of fiduciaries who are not required to be licensed:

1. A trust company defined in PC Sec 83;

2. An FDIC insured institution;

3. Any public agency, including the public guardian, public conservator or other agency of the State of California or of a county of California or any regional center as defined in WC Sec. 4620;

4. Any nonprofit corporation or charitable trust defined in IRC Sec; 501(c)(3);

5. A person employed or acting as an agent for the first four groups; and

6. Any person whose sole activity as a professional fiduciary is as a broker-dealer, broker-dealer agent, investment adviser or investment adviser representative registered and regulated under the Corporate Securities Law of 1968, the Investment Advisers Act of 1940 or the Securities Exchange Act of 1934, or involves serving as a trustee to a company regulated by the SEC under the Investment Company Act of 1940.

   According to PC Sec. 6530, the PFA does not apply to the following groups:

1. A person licensed as an attorney under the State Bar Act (Business and Professions Code Chapter 4);

2. A person licensed as, and acting within the scope of practice of, a CPA pursuant to Business and Professions Code Chapter 3 of Division 3; and

3. A person enrolled as an agent to practice before the IRS (for technical reasons this exemption has been determined not to apply to the IRS Enrolled Agents).

   Who Does Need a License?

   A person who acts as a conservator of the person, the estate, or person and estate, or guardian of the estate, or person and estate for...