What are probate bonds?
Probate bonds (also referred to as a fiduciary bond) are a type of court bond that ensures that the estate of a deceased, incapacitated, or minor person is handled properly by the administrator, executor, curator, or tutor. The bond is required by the court and put in place to protect the assets of the estate and ensure payment by the principal (the fiduciary) if the fiduciary did not act ethically in his/her role.
Case Study: Your Great Grandmother, Katherine, passed away peacefully in her sleep a few months ago. Unbeknownst to the family, Katherine had been quietly amassing a small fortune which was to be divided equally between her grandchildren and great grandchildren upon her passing. The will named your oldest cousin Meryl as the executor in charge of her estate. After learning about your inheritance, you discovered that Meryl has been gallivanting around Europe and has used your inheritance money to fund her trip. Knowing Meryl’s proclivity for taking lush vacations, and the fact that she’s been gone for two months, you are unsure if you will ever see any of your inheritance.
A probate bond helps to prevent the above scenario from happening. It is important to note that the bond does not protect the fiduciary. It, instead, protects the heirs of the estate and the estate itself by stating the fiduciary will perform his or her duties in good faith. If there is a claim on the bond, and the surety determines the claim to be valid, the surety will pay the court up to the bond amount. Since a bond is not insurance, the surety will recoup their loss from the fiduciary. Using the example above, Meryl may have been less inclined to go on her Europe trip knowing she is ultimately on the hook for the bond as the executor and bond principal.
Who needs a probate court bond?
Probate bonds are needed by a person acting in a fiduciary capacity. There are various types of probate bonds: administrator bonds, conservator bonds, tutor bonds, etc. The type of bond depends on the circumstances: handling the assets of a deceased person versus handling the assets of a minor. A common example of when an administrator bond is needed is when the fiduciary lives in a different state from the deceased (a child living in a different state from a parent). The bond is required because the estate is subject to a different jurisdiction than that which the principal lives in. The court will determine if a bond is required and the amount.
How to get a probate bond
There are many things the surety looks at when reviewing a probate bond application. What is the principal’s (the fiduciary) relationship to the deceased or minor? What is the makeup of the estate? Is there any dissension between the heirs? Is there an attorney involved? The answers to these questions help to determine the favorableness of the risk for the surety. For example, real estate property may be viewed as more favorable than cash or jewelry which is easier to pocket and sell (as was the case in our above example). Having an attorney involved may also provide some more oversight to the fiduciary.
As discussed above, the surety will recoup any losses it incurs from the principal. The principal will sign an indemnity agreement prior to bond issuance promising payment to the surety should a claim arise. This is a standard practice when obtaining any type of court bond. Due to the sensitive nature and timeliness that probate bonds require, it is important to work with an experienced bond professional who can handle the situation quickly and with care.