If a loved one died without a will, the court might appoint you as the estate administrator. This person takes charge of the deceased’s estate, distributing assets and paying creditors as necessary. However, this position as a fiduciary may financially impact you if you make errors that reduce the value of the estate.
According to TWFG Insurance Services, a probate bond protects the beneficiaries of an estate by guaranteeing that the estate administrator follows through on the required fiduciary duties. You may require bonding if you are the court-appointed administrator.
How probate bonds work
These bonds work as insurance policies and are a contract between three parties. The first is the principal. This is the person responsible for its purchase, usually the executor or administrator assigned to the estate. The second party is an heir to the estate, typically a family member of the deceased person. The third party is a surety that sells the bond to the principal. It is the party that reimburses the heirs if they file a claim.
The cost of the bond depends on various factors, including the value of the estate. You pay a percentage of the bond cost when you buy it and receive paperwork that indicates the bonding. The court may require proof of the bond before the estate can move through probate.
How you benefit from a probate bond
If the estate’s value is not significant and the heirs wish to waive the bond, you can continue without one, but it has benefits. First, it shows good faith, as you must pay the remainder of the bond if you commit fraud or other wrongdoing. It acts as a guarantee that you will fulfill your obligations to the best of your ability.
Untested administrators often prefer some insurance in the event something goes wrong during the handling of the estate. If something adversely affects the estate’s value, such as an inaccurate appraisal, the heirs could file a claim. Having a probate bond shows that you take your duties seriously and gives beneficiaries peace of mind.
Understanding the duties and responsibilities of an estate administrator can help you handle probate and the distribution of assets as the deceased intended.