How does a Probate Bond work? [What is it?]
If you have been assigned the role of the fiduciary or executor of an estate in a will or by a court of law, you may need to secure a Probate Bond (also known as a Fiduciary Bond). Even if the will stipulates a bond isn’t necessary, the judge may have the ability to order the fiduciary to purchase a bond. However, requirements set by the court vary by state, city, county and township, since probate laws differ by jurisdiction.
Another reason you may be ordered to get a Probate Bond is if the court has appointed you as a guardian or custodian for a minor or an individual who is unable to make financial decisions.
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A Probate Bond is a contract comprised of three parties.
Obligee – The court ordering the bond.
Principal – As the fiduciary, you are named principal on the bond document.
Surety – The company issuing the Probate Bond.
The bond is your guarantee to the court that you’ll handle the estate following the guidelines of the will or court order. If you fail your duties and obligations as the fiduciary, the estate’s heirs and beneficiaries can make a claim against your bond to recoup their losses.
A Probate Bond is not always a requirement. Before purchasing a bond, we recommend verifying if a bond is necessary with your attorney.
How much does the Bond cost?
When calculating the cost of your bond, the surety factors in the risk associated with the policy. The biggest factors are the bond amount, your financial status and your credit. When pulling your credit, we perform a soft-pull. Meaning your credit score isn’t adversely impacted. High-risk applicants generally receive larger quotes.
In lieu of offering 100% collateral to the court, the cost of the bond (known as the premium) is just a small percentage of the full bond amount. Your bond amount is set by the court and is determined by the value of the estate. Applicants with good credit generally pay 1% to 3% of the bond amount.
How to get a Probate Bond with bad credit
You may still be approved for a Probate Bond, even if you don’t have great credit. However, due to the high-risk associated with Probate Bonds, your premium will likely be between 5% and 15% of the bond amount, pending approval from the surety.
Applicants with non-standard credit are more difficult to place with a surety company when issuing a Court Bond. But, our team will work with our surety underwriters to ensure we cover all your available options. Apply for your Probate Bond here!
Probate Bond Types
“Probate Bond” is an umbrella term for many different types of bonds. The type of bond you require depends on your responsibilities set by the court. These responsivities may include caring for a minor(s) or a debilitated individual, appraisal of assets or administering properties and assets.
Regardless of your fiduciary responsibilities, you are always expected to perform your court-ordered duties ethically and faithfully.
Below are the most common types of Probate Bonds.
Administrator Bond [also known as a Personal Representative Bond]
You must abide by the court orders when disbursing or using the estate when the deceased passed intestate.
A Conservatorship Bond protects the minor or debilitated individual who you’ve been assigned to manage their financials.
If you’ve been named executor in a will, the Executor Bond ensures you will use and disburse the estate as detailed in the will.
In some states, a Guardianship Bond and Conservatorship Bond are interchangeable. As the guardian, you manage the day-to-day care of the dependent, while the conservator manages the dependent’s finances.
A Trustee Bond ensures you will follow the law and provisions of a trust while managing the property and assets once owned by the deceased.
What happens if I get a claim?
A Probate Bond doesn’t provide coverage for you, the fiduciary. Instead, the bond functions as a safeguard for the court and the individuals involved in the court case. If someone involved is a victim of financial loss because of your unlawful or unethical actions, they may file a claim against your bond.
Both you and the surety don’t anticipate a claim being made against your bond. Yet, claims on Probate Bonds do happen. The surety company that issued your bond will conduct a thorough investigation to determine the validity of the claim. They will payout up to the full bond amount to the claimant in the event they find their claim to be valid. You are responsible for making the surety company financially whole again after a payout.
Who pays for the bond? [Is the money refundable?]
Typically, the fiduciary is responsible for paying the bond premium when purchasing a Probate Bond. However, they usually are reimbursed via the payment from the estate’s assets after the court proceedings have finished. If you’re unsure about receiving a reimbursement, please verify with your attorney.
Any premium collected within the first year of the bond is considered fully earned and not refundable by the surety. However, if the court exonerates your case mid-term, you may receive a prorated refund in premium paid for the remaining term length outside of the first year. You must provide exoneration documents to the surety to cancel your Probate Bond.
How long does a Probate Bond last?
The Probate Bond is renewed annually, as long as the probate case is still open. Or, in the case of a conservatorship, the dependent is still a minor or is unable to manage their personal finances. On average, the probate process may take up to 24 months to complete.
Once you receive exoneration documents from the court, you’ll need to submit them to the surety to cancel your bond. Your bond will not be cancelled until the surety receives the exoneration documents, so please submit those documents after receiving them from the court.
Where to get a Probate Bond
If you’ve been tasked with getting a Probate Bond, our team of surety experts are happy to assist you with a custom quote. At Surety Solutions, A Gallagher Company, we work with leading surety companies to ensure we find you the best rate for your bond.
Additional Surety Bond Resources
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