Surety Bonds for Fiduciary Bonds
What is a Fiduciary Bond?
Probate Bonds and Fiduciary Bonds
Probate and fiduciary bonds ensure that caretakers are able to ethically and honestly fulfill their court-appointed duties (particularly, those related to fund management) according to the court’s expectations. Fiduciary and probate bonds are an umbrella term for bonds that guarantee individuals will fulfill their court-appointed tasks. The terms “fiduciary bond” and “probate bond” are used interchangeably.
Types of fiduciary bonds include:
Custodian Bond: A person purchases a custodian bond only after he or she is named to be a custodian of a disabled person or a minor and their assets. A custodian bond makes sure that fraud or unethical behavior is not committed. It is very similar to a guardianship bond.
Guardianship bond: A guardian is a person who has legal authority to care for the personal and property interests of another person, also known as a ward. Guardians are typically used in three situations: guardianship for an incapacitated senior (due to old age or infirmity), a minor or a developmentally disabled adult.
Executor Bond: An executor bond is issued in order to manage the wishes expressed in the deceased’s will and estate. Before an individual can officially be appointed as an executor, the court responsible for the estate might require a surety bond be acquired.
Veterans Affairs Fiduciary Bond: Most veterans, surviving spouses, their children or sometimes dependent parents are entitled to receive VA benefits. In 2011, the United States Department of Veterans Affairs began allowing veterans’ friends and family members to act as guardians of the veteran. This bond provides financial stability to those who are the next of kin of military veterans, makes sure the veteran’s bills are paid on time and that their assets are ethically distributed.
Nominal Bond of Personal Representative (Maryland): This bond is required of the Personal Representative of a will, in order to guarantee that the will is executed according to the deceased’s wishes. This bond requires the court-appointed personal representative to use funds from the estate to pay all debts owed by the deceased, the Maryland inheritance tax, court costs and register’s fees.
A court may require a fiduciary bond for any person or party that has fiduciary duty or responsibility to another. In general, a fiduciary is someone who owes a duty of loyalty to protect the interest of another. When you are named as the fiduciary or executor to protect the heirs of an estate, fiduciary bonds are required by a court. The court requirements vary by the state, county, town or city where the decedent lived at the time of his death, as probate laws vary by jurisdiction. A bond can be required even if the will states that no bond is needed, as it is ultimately left to the judge’s discretion. A fiduciary may be a trustee, executor, personal representative, administrator, guardian, financial advisor, or other person exercising control over another person’s assets and/or property.
The fiduciary bond imposes an obligation on the surety to pay to the court a certain amount in the event that the fiduciary breaches his/her duty. This bond type is referred to by other names such as probate bonds, estate bonds and executor bonds.
What is the cost of a Fiduciary Bond?
State laws determine the amount of the bond. Generally, the amount of the bond is equal to the estimated amount of assets being managed, but may be, and often is, higher. The cost/premium for the bond is generally based on a percentage of the bond amount. For instance, if the cost/premium is 1% of the bond amount, and that amount was set at $500,000, the premium will be $5,000. If the court has ordered a fiduciary bond, the fiduciary is not going to have access to the funds of the estate or trust to pay for the bond until after the bond has been issued. Therefore, the fiduciary must personally pay for the bond. And unless an instrument provides that the estate or trust is to reimburse the fiduciary, the fiduciary will likely bear this expense.
What if I have bad credit?
As for fiduciary bonds, it might be possible to get bonded with bad credit, but only for applicants with minor financial problems.
Contact us today if you have any questions regarding probate and fiduciary bonds!
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