A probate bond is a court-ordered bond that must be issued to an individual who is serving in a fiduciary capacity to an estate of a deceased person. When an individual passes away, a personal representative has the duty of petitioning with the local court to open probate for the estate.
However, before the court will appoint any person to an important role related to the estate, they usually require that they obtain a bond. The bond does not protect that representative; rather, it protects the estate and its heirs. It places a financial incentive structure in place to minimize the risk of the fiduciary or representative from conducting any malfeasance or misappropriation.
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With that being said, there are several different types of probate bonds. They essentially serve the same function, but vary based on the duties involved. Here are 6 probate bond types we’ll be discussing today:
1. Administrator Bond
An Administrator Bond is one of several types of court bonds that ensures that the Administrator will honestly and dutifully manage the estate in line with probate laws. This includes the use, management, and disbursement of the estate. If the Administrator uses the estate inappropriately or for personal gain (and not in line with the wishes of the decedent), then any party related to the estate can file a claim against the bond.
An Administrator is a court-appointed representative of an estate. They are charged with the duties of managing and disbursing the estate on behalf of its heirs. If a Will is in place, the document may provide for the Administrator to be paid for their time and effort. Their exact role will vary depending on the size of the estate, and whether or not an estate plan was in place.
The exact role of the Administrator of an Estate will vary depending on the size of the Estate, and whether or not there was an estate plan. That being said, typical duties include tasks such as gathering and inventorying the decedent’s belongings, assets, and financial accounts, settling any debts of the deceased, and distributing assets and property according to the law and the estate plan.
2. Personal Representative Bond
A personal representative bond guarantees the performance of duties by a personal representative of an estate. A personal representative is a fiduciary, meaning they are financially responsible and are charged with duties that benefit the estate and its heirs (and not themselves.) The bond guarantees that the representative won’t stray from these duties, such as ensuring that the assets held in the estate do not lose value. The bond protects the estate from the malfeasance, misfeasance, and nonfeasance of the representative.
The personal representative must first identify the heirs and creditors of the estate. Next, they will identify, collect, and inventory the decedent’s assets. The remaining estate will be distributed to the heirs after paying off debts and taxes. The personal representative must fulfill their duties faithfully per the laws of the probate court and any wishes outlined in the Will.
3. Estate of Court Bond
In general, any court bond having to do with an estate and the probate process has the same function as any other type of personal representative or Executor bond. It’s a type of surety bond that ensures that the executor or personal representative fulfills their legal obligations. The court will order the fiduciary such as they have to purchase an estate bond from a surety bond company. Doing so requires them to submit an application and consent to a credit and background check. Once approved, the individual is issued an estate bond.
Individuals who are issued an estate bond have a duty to fulfill the legal obligations assigned to them. For instance, their duties might include distributing the estate property in accordance with the state’s probate or intestacy laws.
4. Conservatorship Bond
A conservatorship bond is one of several types of probate bonds. In this particular case, the bond protects the individual who will be placed under the conservatorship. Should the appointed Conservator fail their duties or obligations, then the bond will provide financial reparations to the Conservatee. The bond also provides protections against violations such as theft, fraud, and the mismanagement of funds.
The duties of a Conservator can vary widely based on the laws of the state, as well as the specific and individual needs of the Conservatee. For instance, one Conservatee may require that the Conservator make arrangements to ensure their daily needs are met, such as meals, clothing, and personal care. In other instances, the Conservator may take on a financial role such as managing the Conservatee’s finances, investments, or business assets. The California Courts provides an example of possible Conservator duties here.
5. Trustee Bond
An individual might choose to establish a Trust for his or her beneficiaries, rather than passing on their estates outright. A Trust is similar to a Will, except that it allows for more control over how property and assets should be handled, and the manner and timing in which these assets are distributed to beneficiaries. Further, assets transferred to a Trust do not have to pass through the probate process. The Trustor (the individual creating the Trust) must name a Trustee who will be responsible for managing and distributing these assets on behalf of the Trust and its beneficiaries. Here, the Trustee can be required to purchase a trustee bond before they can perform their duties. Similar to the other types of probate bonds, the Trustee bond ensures that the Trustee acts in accordance with the Trust provisions and the law. If they fail to do so, any individual can make a claim against their bond and hold them financially accountable.
The key duties of a Trustee include preserving the value of property and assets held in the Trust, as well as managing and distributing Trust assets. The overarching goal is to act in accordance with the wishes of the Trustor, and in the best interest of the beneficiaries who will benefit from the Trust. The Trustee should follow the specific set of terms and guidelines outlined in the Trust document.
6. Executor of Court
Last but not least is the Executor bond. This type of bond functions similarly to each of the other types of probate bonds outlined in this guide. In this case, it is assigned specifically to the Executor of an estate. When an individual creates their Will, they must also nominate an Executor of their estate. This individual is being asked to manage the estate when the Testator passes away. Thus, they have a set of legal duties that must be fulfilled. Here, the court will require them to obtain an Executor bond before they will formally appoint them to the role. In the absence of a Will, the probate court will appoint an Administrator instead.
An Executor of the estate has many duties and responsibilities. First and foremost, they are typically responsible for filing for probate when the estate owner passes away. Once the notice of death and petition for probate are filed, they must dutifully notify all interested parties, such as family members, heirs, and creditors. An inventory of assets and property are submitted to the court and debts and taxes are paid. Once the court has confirmed that no outstanding claims to the estate remain, the remaining assets are distributed to the heirs. Upon completion, the Executor closes the estate and their duties conclude.
The probate bond is one of the lesser-known aspects of the estate planning process. If you are in the process of creating your estate plan, it’s a great idea to consult the Executor, Conservator, or other fiduciary you have in mind. The cost of purchasing a probate bond varies based on the total value of the estate. In some cases it can cost a few hundred dollars, while in other cases it can cost tens of thousands of dollars (or more!) While your nominated representative can get reimbursed by the estate for this expense, it’s a great practice to ensure they understand that they will likely be required to purchase a bond, and that they are willing to cover the cost until reimbursement.
Otherwise, the court will not appoint them to the court and they will not be able to fulfill their duties. If this happens, the court will have to appoint an alternate representative that may not be of your choosing. Having these important conversations down to the minutiae of estate planning with this involved can make or break an outcome.
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