Settling wills and estates is often a straightforward process. But in some circumstances, the probate court may require the fiduciary to obtain an executor or administrator bond.
An administrator executor, fiduciary, or personal representative bond is a type of court bond required to safeguard the estate and ensure that the wishes of the decedent are carried out. The bond also protects the rightful heirs of the decedent’s estate.
An administrator and executor have similar duties. They both oversee the assets of a decedent. However, an executor is named by the decedent in their will. An administrator is appointed by a probate court to oversee an individual’s assets if they die intestate, or without leaving a will.
An administrator bond guarantees that the appointed administrator will abide by state laws and terms specified in the will, trust or court order. The decision to require a bond belongs to the court, even if the will says that no bond will be required.
If an administrator doesn’t abide by the terms of a will, trust, or court order, a person who is affected can make a claim against the bond. They must file their claim through the court, and if the court determines that the bond must pay, the fiduciary or executor will be the final party who is financially responsible.
Based on a valuation of the estate’s assets, the probate judge sets the amount of the administrator or executor bond.
Duties of the executor or administrator
The executor or administrator is responsible for overseeing the decedent’s assets until their estate is settled. Obligations usually include:
- Examining the will and any trust documents
- Record keeping and accounting
- Payment of debts or financial obligations
- Carrying out distribution of property to beneficiaries (although funds cannot be disbursed without probate judge approval)
- Paying for funeral and burial expenses from the funds of the estate
- Following the terms of the will
If an executor or the administrator mismanages estate funds, resulting in a loss to the beneficiaries, the fiduciary can be found personally liable for the loss.
When are executor and administrator bonds required?
Probate court does not require executor or administrator bonds in the case of every estate. A probate judge who is confident that the executor or administrator will meet their responsibilities can decide to waive the bond. However, there are circumstances where the probate court requires an executor or administrator bond. Some examples include:
- When family members or other parties contest a decedent’s will
- When the appointed executor is not a family member
- When the executor named in the will has died or chooses not to serve (A person has the right to decline being the executor.)
- The estate is very large or valuable
- Required by state law
Who can file a claim against the probate bond and how?
Claims against probate bonds are filed in the probate court where the estate is filed. Both the complaining party (any outside party) and the administrator or executor will be given an opportunity to present evidence. If the complaining party can demonstrate that actions taken by the administrator or executor were not in the best interest of the estate, or violated court approval, a judgment may be entered against the bond and the fiduciary. Actual losses to the estate, including interest on the loss amount, and the complaining party’s attorney fees can be added to the judgment.
Whether or not the bond satisfies the judgment, the fiduciary will be responsible for paying bond claims in full. If the fiduciary doesn’t pay, the surety can obtain a judgment to enforce its rights under the indemnity agreement.
Disputes among the heirs of an estate are a red flag for issuing a bond. When there is a known dispute, the surety will need details about the situation in order to make a decision about the bond. Information about a known dispute might be included in the court order.
How a probate attorney can help with a settling a large or complex estate
A probate attorney can represent the heir to an estate, the administrator/executor, or even the estate itself. If an estate is large or complicated, an inexperienced executor may have difficulty carrying out their responsibilities to the estate. The involvement of a probate attorney may make it more favorable for the surety to issue an executor/administrator bond.
A probate attorney has experience handling many of the items involved in settling an estate such as:
- Collecting life insurance policy proceeds
- Identifying all estate assets
- Determining and paying inheritance taxes, estate, and income taxes
- Filing and paying applicable estate and income taxes
- Making final distributions after paying all bills and taxes
- Opening and managing the estate’s checking account
- Ordering property appraisals for real property
- Preparing and filing all court documents
- Retitling assets in beneficiaries’ names
Insurance agents who are interested in working with probate bonds can network with local probate attorneys for referrals and other information. Contact your Old Republic Surety branch if you have any questions about what is involved with underwriting probate or executor bonds.
Beth Harbeck is the Midwest Regional Vice President of Commercial Surety for Old Republic Surety Company. She is located in West Des Moines, IA. Beth has been in the surety industry for 20+ years. She worked for Merchants Bonding Company and Nationwide Surety and Fidelity before joining Old Republic Surety Company in 2014. Beth loves to travel, entertain, and watch sports.