When someone passes away suddenly, their loved ones are often left with settling their estate. The entire process can be more straightforward if the deceased had an estate plan in place, but things still need to be taken care of even if they did not. A critical step that will help you in this process is buying estate surety bonds.
This blog post will discuss estate surety bonds and why you might need them. It will provide some tips on choosing the right one that suits your needs.
What Are Surety Bonds in Estate Planning?
They are a type of court bond required to probate an estate. The purpose of the bond is to protect the estate’s creditors from any losses incurred due to the probate process.
Here are the standard steps to take to get a bond.
-Find a surety company that is licensed in your state
-Complete an application with the chosen surety company
-Pay the premium for the bond
-Sign the bond agreement
-Have the agreement approved by a judge
After all these steps, you will be able to get your bond.
Types Of Estate Surety Bonds
There are four types:
1) Probate
The court requires a probate bond during the administration of an estate.
It protects the estate’s beneficiaries from any financial loss due to mismanagement or fraud on the executor or administrator.
Probate bonds are also known as fiduciary bonds.
2) Guardian
A guardian surety bond is typically required when someone is named the legal guardian of another person’s property. The bond guarantees that the guardian will manage the property according to the terms set forth by the court.
If you consider becoming a legal guardian, you should be aware that you may be required to purchase a guardian surety bond.
3) Administration
These are common in many probate proceedings. If the decedent left a will, the court might appoint an executor to carry out the terms of the will. An administrator is hired when there is no will or if the person named in the will is unable or unwilling to serve. Either way, the court requires that administrators post an administration bond to protect the estate’s assets.
Who Needs A Surety Bond for the Estate?
Here are some everyday situations where an estate surety bond may be required:
-When a will is contested
-When there is no will
-When the executor is out of state
-When the executor is a nonrelative
-When the decedent owned real property in more than one state
-To probate a small estate
If the court requires an estate bond in these cases, it will set the amount. If you are the executor in a will or appointed by the court to administer an estate, you must purchase this bond before beginning your duties.
How Much Does it Cost?
The cost of this bond is based on the estate’s value. The premium will be a percentage of the total value, and the rate will vary from company to company. You can get a quote from a surety bond company to determine how much it would cost.
These are not cheap, but they are a necessary expense if you are named as an executor in someone’s will.
What Are The Risks Associated With Surety Bonds?
Here are some of the risks to consider before buying:
-The size of the estate. If the estate is large, the potential losses could be significant.
-The type of assets in the estate. If the estate includes valuable assets, such as real estate or stocks and bonds, the potential losses could be substantial.
-The financial condition of the estate. If the estate is in financial trouble, the potential losses could be significant.
-The ability of the estate to pay the bond. If the estate cannot pay the bond, the potential losses could be substantial.
What Happens If The Terms Of The Bond Are Violated?
If you fail to uphold your duties or violate the terms of the bond, the court may order you to pay damages. The court will determine the amount you are ordered to pay based on the estate’s loss.
Final Words
Surety bonds are a necessity for many different types of businesses. Suppose you are in the process of starting a business or expanding your current operation. In that case, it is vital to understand the different types of surety bonds and how they can benefit your company. Estate surety bonds are one type of bond that can benefit businesses.
