A beneficiary is a person who receives benefits from the VA, while a fiduciary is someone who is appointed by the court to supervise a beneficiary who has been deemed incapable of handling their own benefits. In most cases, the fiduciary that is appointed is a family member or a close family friend of the beneficiary. Since the veteran (beneficiary) is vulnerable and cannot make legal decisions on their own, it is crucial that the veteran is protected by a bond.
The three parties of this bond include the obligee, the principal, and the surety company. The obligee is the U.S. Department of Veterans Affairs and requires the principal to be bonded. The principal is the VA fiduciary and must be bonded in order to legally supervise the veteran’s assets and benefits. The surety company is the party that underwrites and ensures the bond.
A Veteran Affairs Custodian surety bond guarantees protection of the beneficiary’s estate against mismanagement or abuse by the hands of the fiduciary. Without a bond, a fiduciary legally cannot be certified. The bond outlines the particular duties of the fiduciary.
For example, if a fiduciary is appointed to take care of paying the beneficiary’s taxes and bills on time, then the surety bond will outline the legal requirements and expectations of the fiduciary’s specific obligations.
The surety bond is an agreement between the three parties that the principal will act accordingly to what is stated in the bond. If the fiduciary acts fraudulently or fails to provide adequate accountings, then the surety company will cover the claim filed against the bond.
The VA (the obligee) sets up the bond form and bond requirements. If the fiduciary acts against the bonding requirements, the VA can revoke the court’s rulings of the fiduciary’s role and cancel the surety bond.
If the veteran has to take an unlawful fiduciary to court, the bond will cover the veteran’s expenses up to the full bond amount which will provide the veteran financial stability until the court reaches a ruling.
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 against the bond, then the surety company will pay for all paid claims which the principal must pay back to the surety.
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 VA Administration, not the surety company. 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.
The specific bond amount is determined by coverage of all of the veteran’s assets that remain in the estate of the veteran as well as the planned yearly income from the Department of Veterans Affairs benefits.