Probate & Fiduciary Bonds
Learn more about probate bonds (aka fiduciary bonds) below, or request a quote online today. At Surety Bond Professionals, our experienced surety agents are ready to assist with all of your bonding needs and any questions you may have.
What Are Probate Bonds?
To understand probate bonds, it’s important to understand what a fiduciary is. A fiduciary is someone who has been given power to manage another person’s affairs and assets. That could mean making decisions on behalf of a person who has been found incompetent to manage his or her own finances or managing the estate of a deceased individual.
In many cases, there is a pre-existing relationship between the fiduciary and the person whose affairs the fiduciary is managing. In other instances, such as when a person dies without a will, an attorney or bank official may be designated by the probate court to serve in a fiduciary capacity. Unfortunately, regardless of any pre-existing relationship, some fiduciaries may put their own personal gain before their fiduciary responsibilities.
A fiduciary bond (also known as a probate bond, executor bond, or estate bond) is a type of court surety bond guaranteeing that a fiduciary will carry out his or her designated responsibilities in a lawful and ethical manner. It protects the interests of the incompetent person or the creditors, heirs, and beneficiaries of the deceased individual.
Who Needs Them?
The court with jurisdiction in a competency or probate matter will decide whether to require a fiduciary bond. You may be required to obtain a fiduciary bond if you have been named in someone’s will as executor of the estate. This bond may also be required if you have been appointed by the court as guardian or custodian for a minor or an adult who is incapable of making financial decisions.
Types of Probate Bonds
There are actually many different types of probate bonds, depending on the responsibilities of the fiduciary. Some of the most common types of probate bonds are executor, trustee, administrator, personal representative, guardianship, and conservatorship bonds. Depending on the fiduciary’s role, the different bonds can govern activities like:
- Caring for minors
- Being responsible for an incapacitated adult
- Managing assets and properties
- Having assets appraised
- Distributing assets
- Paying debts and collecting payments on behalf of a person or estate
No matter the type of bond, however, and regardless of your duties as a fiduciary, there is always one common responsibility, and that is to carry out your court-appointed duties honestly, faithfully, in accordance with the will or wishes of the principal, and in line with the expectations of the court.
How Do They Work?
The court that orders the bond is the obligee in the bond agreement, and the fiduciary is the principal. The underwriter that issues the bond is the surety. The terms of the bond will spell out the behavior that is required of the fiduciary. In purchasing the bond, the fiduciary is pledging his or her own assets as a guarantee against financial loss due to fraud, embezzlement, or willful mismanagement. The bond makes the principal solely liable for any such loss.
Someone who does suffer a financial loss due to the fiduciary’s unlawful or unethical behavior can file a claim against the bond. The surety will make sure the claim is valid before paying it. Because every fiduciary bond contract includes an indemnity clause that holds the surety harmless, the principal must reimburse the surety for the amount paid out on the claim.
What Do They Cost?
The court will determine the required amount of a given fiduciary bond based on the value of the estate. You will pay only a small percentage of the bond amount, however, known as the premium.
The premium is determined by the surety and is based on relevant financial factors, such as the principal’s credit score and financial standing. Because the principal’s character is a key consideration in predicting the likelihood of a “bad act,” the surety could also ask for a background check.
Our surety bond professionals will help you with your bond need easily and quickly. Apply now!