A trust is similar to a will. Trusts provide instructions on how an individual would like his/her property and assets to be distributed to beneficiaries when the individual passes. The trustee is the party that is in charge of administering the trust.
The three parties of this bond include the obligee, the principal, and the surety company. The obligee is the court that is requiring the principal to be bonded. The trustee (principal) must be bonded in order to legally act as a trustee. The surety company is the party that underwrites and ensures the bond.
What is a Trustee Surety Bond and what does it do?
The Trustee Surety Bond is an agreement between the three parties that the principal will act accordingly to what is stated in the bond. If the trustee acts fraudulently or fails to abide by the bond requirements, then the surety company will cover the claim filed against the bond.
This bond is required by the court for the person(s) appointed as trustee for an estate, minor, or the deceased. The bond ensures that the trustee will perform his/her duties legally and ethically. Instead of passing on an estate, a person can establish a trust or trusts for his/her beneficiaries.
Obligee and Bonding Requirements
As stated before, the court requires a trustee to be bonded. The bond ensures that the trustee will not commit any fraudulent acts with their legal power during his or her service.
It is a good idea for the principal to be informed on all requirements before applying for a bond. If the principal acts against the bond and a claim is filed, then the surety company will pay for all paid claims which the principal must pay back to the surety.
Bond Amount and Bond Cost
The cost for the bond is also referred to as the bond premium. The bond premium is the one cost that the surety company sets. All other fees that are related to the bond are set by the obligee. The bond premium is only a small percentage of the bond amount.
The bond amount is set by the obligee, not the surety company. Usually, the judge will set the specific bond amount according to the case. The bond amount is the amount of coverage the surety company will pay out to the party harmed if a claim is filed against the bond.
For a more detailed bond description and additional information concerning other probate surety bonds, click here.