Question: I was recently appointed Administrator of my uncle’s estate, but the Decree from the Surrogate’s Court said that I must post a bond. What does that mean?
Answer: It is fairly common that the fiduciary of an estate may receive notice that the he or she must be bonded in order to complete the appointment by the Surrogate’s Court. The bonding requirement of an Executor (when a Will is probated) or an Administrator (when there is no Will) is not as strange or as intimidating as it may sound.
What Is a Fiduciary Bond?
A bond is essentially an insurance policy issued by a bonding or surety company that provides security for the estate’s assets. If the fiduciary misappropriates or improperly takes estate assets, the surety company may be required to reimburse the estate and its beneficiaries for the loss.
The surety company incurs a financial risk by issuing a bond. In order to issue a bond, the surety company will require that the fiduciary have a solid financial and credit background. This generally means no criminal convictions or bankruptcy filings. If the prospective fiduciary cannot obtain a bond he or she would need to forfeit her appointment in favor of an alternate fiduciary that can satisfy the surety company’s requirements.
The amount of the bond required by the Surrogate’s Court depends upon many factors. The value of the estate is the starting point. Generally, the greater the value of the estate, the greater the amount of the bond. The surety company will charge the estate an annual premium for the bond based upon the value of the estate.
The procedure to obtain the bond is relatively simple. The fiduciary completes and submits an application with the relevant personal information and case information for approval to the surety company. Once the application is approved, the fiduciary pays the premium and the bond document is sent out. The fiduciary then signs the bond and it is filed with the Surrogate’s Court. Once the bond is filed, the Court issues the Letters Testamentary or the Letters of Administration.
Most Wills do not require the Executor obtain a bond and in most probate matters, the Surrogate’s Court does not require the posting of a bond. If the nominated fiduciary asks the Court to issue Preliminary Letters Testamentary the Courts generally require the fiduciary to post a bond.
However, if you die without a Will, and an Administration proceeding is commenced, the Surrogate’s Court usually requires the filing of a bond. A bond can be avoided if all of the interested parties sign a Waiver and agree that the filing of a bond is not necessary. The bonding requirements in an estate where the decedent died without a Will can vary depending on the county in which the Surrogate’s Court proceeding is commenced.
After the estate administration has been completed, the fiduciary is required to account and make a final distribution of estate assets to the beneficiaries. When all beneficiaries have signed a Release or the Surrogate’s Court has issued a Decree settling the fiduciary’s account, the bond will be terminated.