If you are coping with a death in the family, it's good to understand as much as possible about probate matters. Probate is a powerful legal method of handling an estate after someone passes—and sometimes a probate bond is needed. Read on to find out what that is and how it protects an estate.
What is a Probate Bond?
This type of bond is also known as a fiduciary bond. You might want to think of it as insurance against any wrongdoing by the executor, personal representative, or administrator of the estate. For example, if your mother passed away and named her caregiver as executor, the bond protects you in case that caregiver steals estate property or engages in fraudulent activities. If that occurs, the bond replaces assets and pays any creditors to the estate.
The Executor's Role
Executors have a lot of power over how an estate is settled but they also have a lot of rules to follow. The bond ensures that the executor doesn't use their position to make estate decisions based on what is best for them instead of for the estate itself. For instance, if no other plans are in place, it is the duty of the executor to pay any funeral or burial expenses for the deceased. They also must keep estate property safe during probate and give a full accounting of all funds spent and assets disbursed.
How Do These Bonds Work?
If the probate judge asks for a bond, it's the responsibility of the executor to purchase the bond and provide proof to the court. The cost of the bond corresponds to the value of the estate. In many cases, it's a small percentage of the value of the estate—such as about 0.6%. The executor is allowed to reimburse themselves for the cost of the bond from estate funds if there are any available. Bonds are available from surety companies and can often be purchased at businesses that sell other forms of insurance such as homeowners and auto insurance.
What About Bond Claims?
When a claim is made, the bond is paid only after an investigation is complete by the surety company. The company places the burden of resolving the issue with the executor before they payout on the claim. However, the executor in charge of the estate must pay back the surety company for the full cost of the claim—they are not off the hook until they make things right.
To find out more about probate and probate bonds, speak to a probate law attorney.
