Probate court is the legal institution managing estate administration, trusteeship, and several other processes that involve fiduciary duties. That means serving as an executor, administrator, trustee, guardian, or any other role appointed by a probate court is a major responsibility to take seriously.
Whether it’s administering the estate of a deceased person or negotiating the guardianship of a minor, these roles all require a person with a firm commitment to faithfully execute the associated duties. Sometimes, a probate court requires a surety bond—a legal and financial guarantee that a person will faithfully perform their fiduciary duty. What is a probate bond, and how can you get one? This guide will discuss the basic concepts of probate bonds, including the process for purchasing one from a surety.
Probate Bonds: Definition and Basic Concepts
We’ll establish the basic definition of a probate bond before moving on to how to get one. First, a probate bond is a type of surety bond—a legal contract that guarantees an agreement or obligation. There is a three party agreement to all surety bonds: the obligee, the principal, and the surety. Here’s how they work together:
- Obligee: The probate court is the obligee or the party that requires the principal to buy a surety bond.
- Principal: The executor, administrator, or other court-appointed representative is the principal or party required to purchase the surety bond.
- Surety: The surety is an insurance company that provides a financial guarantee for the principal’s contract or obligation.
A probate bond guarantees that the principal will do their best to honor their obligations as a court representative. If they don’t, the court can file a claim with the surety, which the surety will pay if the principal can’t or won’t. The principal ultimately owes the surety the full value of any claims that the surety pays.
When Is a Probate Bond Required?
Not every case that enters probate court will require the purchase of a probate bond. Right now, we’ll look at some of the factors that determine whether or not you might require one. First, some estates don’t require probate court at all. Certain legal arrangements allow properties to pass automatically to a surviving spouse, and estates under a certain monetary value are also typically exempt. These laws and exemptions vary widely from one U.S. state to another, so make sure to research all of the options that apply to you.
Your probate court judge will decide whether or not you need to obtain a surety bond, and they will also set the required coverage amount and bond type if you do. Courts usually don’t require surety bonds for corporate fiduciaries, and testators can waive the surety bond requirement in their will. On the flip side, courts are more likely to require surety bonds when dealing with large estates, significant debt, or contested wills. If you need a probate surety bond, the court should provide you with documentation of the requirements for obtaining one, including the required penalty sum. Uncertain about whether you need a probate bond? The best option is always to ask your attorney.
Types of Probate Bonds
If you’re required to get a probate bond, your first task should be to ensure you know exactly what kind of bond you need. Several different types of probate bonds are available, and each covers a different fiduciary role.
- If you manage a deceased person’s estate and were named the executor in the will, you probably need an executor bond.
- If you manage a deceased person’s estate but were appointed by the court because there was no named executor or the named executor couldn’t serve, you probably need an administrator bond.
- If you manage the care and finances of a person who can’t care for themselves, like a minor or an older person, you probably need a guardianship bond.
- If you administer a trust in someone’s name, you probably need a trustee bond.
Note that some states have abolished the difference between executors and administrators, so get your attorney’s advice on which of these bond types you need.
Cost of Probate Bonds
What can you expect a probate bond to cost? First, check the court order to find the required amount that the bond must cover (also called a penalty sum). Don’t worry if you see a required coverage amount that looks very high, such as $20,000. The premium you pay for surety bond coverage will be a small percentage of that amount.
Usually, the premium for the bond will be 0.5 to 1 percent of the penalty sum. However, many factors can affect the percentage the principal pays, including:
- The principal’s credit score and financial history
- The estate’s value, size, and type of assets
- Whether or not the principal is working with an attorney
- Whether or not the will is disputed
- Complicating factors in the estate, such as an ongoing business
- Amount of debt claims against the estate
- The principal’s relationship to the deceased and financial interest in the estate
Ultimately, you’ll need to contact a surety to get a quote for your bond premium. In the next section, we’ll talk about how to do that.
Five Steps to Getting a Probate Bond
- Research: Learn about the specific type of probate bond you need.
- Apply: Find a surety or surety bond broker and apply for a surety bond quote.
- Decide: Once you’ve got your bond quote, decide whether you want to purchase the bond or look for a lower premium.
- Sign: Review the bond paperwork with your attorney and sign it.
- Submit: Have your attorney submit the bond paperwork to the court.
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Probate bonds help protect everyone in a probate court proceeding. If you need a probate bond, reach out to a surety or surety bond broker, and don’t forget to involve your attorney in the process to ensure that your bond meets all required standards.
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