This is a general guide to fiduciary court bonds. A fiduciary bond guarantees that a court-appointed fiduciary will perform all duties required of their appointed capacity. A fiduciary bond is required by the court in order to protect the person for whom the fiduciary is acting, such as a ward or invalid. A fiduciary’s responsibilities could range from managing an estate, giving financial advice or liquidating the assets of company for the benefit of creditors. A common fiduciary bond is a probate bond and may be one of many types: guardianship bonds, conservator bonds, administrator bonds, receiver bonds, executor bonds, and trustee bonds.
The other prevalent category of court bonds are civil court bonds. If you are looking for information on civil court bonds, please click here.
Each and every fiduciary bond under consideration has its own set of specific underwriting requirements to determine the extent of risk. This guide to fiduciary court bonds is a general view. Below are the two basic requirements for any court bond submission:
Administrator, executor, or personal representative bonds guarantee faithful performance of duties whereby the appointed fiduciary takes possession of decedent’s property; inventories and arranges appraisals on assets for sale; collects debts due estate; pays all debts and claims against estate; and distributes all remaining estate assets according to terms of will/state law.
Common Question: “What is the difference between an executor and an administrator?”
Answer: An administrator or executor’s duties are indistinguishable, but generally the difference is the existence of a will. If a will exists, the court will appoint an executor to execute the provisions stipulated in the will. If no will exists, then the court generally appoints an administrator to represent the probate estate. Additionally, the power of an executor can be greater than an administrator in that the administrator’s power is limited to that of the Probate Act, while the executor enjoys increased power provided by the will. Finally, administrators are required to post a bond by the Probate Act, while executors may be exempt from this requirement. The term “personal representative” applies to both administrators and executors.
Administrator/Executor (Personal Rep) bonds are generally considered to be moderate risk. Most sureties
consider this type of probate bond a hazard code “3” on a scale of one to five with five being the most risk. These bonds are, for all
intents and purposes, ethical guarantees more so than financial.
Guardianship, conservator, or guardian by committee bonds guarantee a fiduciary will faithfully carry out responsibilities, according to law, in preserving assets of the ward’s estate. Required to provide accountings to court and comply with all court orders regarding property, monetary assets, and the care and support of the ward.
Common Question: “What is the difference between a conservator and a guardian?”
Answer: Conservators, which can be an individual or corporation with trustee powers, are generally appointed to handle the financial affairs of a minor or incompetent. A guardian may be responsible for the medical decisions of the minor or incompetent or the financial affairs or both.
These bonds can be very hazardous. Risk may be reduced by use of safeguards, e.g. joint control. Sureties consider these bonds a hazard code “3” or “4” on a scale of one to five, depending on the individual circumstances. Generally the longer the obligation of any of the fiduciary court bonds, the greater the perceived risk to the surety. In addition to the application and court order, the surety may request additional information to underwrite the risk such as:
Bonds for trustees in Chapter 7 bankruptcies guarantee the principal will faithfully perform their duties as a Federal court-appointed trustee, including proper accounting of all funds; liquidation
of assets; paying expenses; and distribution of remaining assets to creditors as approved by court. Also, the trustee is responsible for locating and taking possession of all property of the estate, conducting audits, determining claimants and objecting to improper claims. While the bond runs to the Federal Government, it is primarily for benefit of creditors.
Most sureties generally consider these bonds low risk for financially astute, highly qualified professionals experienced in bankruptcy proceedings. Currently, we rate this bond a hazard code “2” on a scale of one to five. Other underwriting information the surety may request includes:
Bonds for trustees in Chapter 11 bankruptcies (reorganization) guarantee faithful performance of duties as the court-appointed trustee. This may involve overseeing the operation of the business or liquidation of the business, filing list of creditors with court along with list of assets and liabilities. Their duties will continue business until the debtor’s plan of reorganization is developed and approved by court or the debtor converts to a Chapter 7. A trustee must have high degree of skill and experience to make prudent business decisions. The bond runs to Federal Government, but is primarily for benefit of creditors.
The surety industry generally considers these bonds low risk for financially astute, highly qualified professionals experienced in bankruptcy proceedings. Currently, we rate this bond a hazard code “2” on a scale of one to five. Underwriting considerations
Receiver bonds in equity courts guarantee a receiver will faithfully perform fiduciary duties and responsibilities as ordered by the court. The duties are essentially identical to requirements of
bankruptcy trustee, however, receiver bonds are usually filed in state court, also called an equity court, and therefore subject to state statutes. Receivers typically take possession of, preserve and
dispose of the identified property under the court’s jurisdiction.
generally considered low risk surety bonds where principal has knowledge, background, and experience in this area. These bonds are rated a hazard code “2” on a scale of one to five.
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