As the Baby Boomer generation gets older, experts are predicting one of the greatest generational wealth transfers in human history. An eye-popping $68 trillion dollars will pass to the children and grandchildren of Baby Boomers, and it will be up to estate executors to distribute all those assets exactly as the deceased intended. It’s going to be a huge undertaking, but, unfortunately, it’s going to be a huge opportunity for fraud and malfeasance as well. Executor bonds make that less likely, which is why most executors must have them. This blog will run down everything you need to know.
What is an Executor Bond?
To begin with, it’s part of a bigger category of bonds known as probate bonds, which all involve dividing up an estate after a person’s death. Executor bonds are also known as administrator bonds, fiduciary bonds, or personal representative bonds in some cases.
If the executor of an estate fails to fulfill his or her legal obligations, executor bonds let the parties who have been wronged seek financial compensation. Essentially, bonds are a kind of financial guarantee, ensuring that unlawful executors are held accountable and the victims are compensated. By holding executors financially responsible, bonds create an incentive for them to follow all applicable laws and professional codes of conduct. In turn, bonds help the estate beneficiaries feel comfortable relying on a specific executor to manage valuable estate assets.
How Does an Executor Bond Work?
Executors have many responsibilities: settling debts, appraising assets, filing tax returns, notifying parties, and many more. If they fail to carry out one of those responsibilities, either intentionally or unintentionally, it could negatively effect a single party or the entire estate. For example, an executor could mismanage investments or directly steal from accounts. If one of the beneficiaries has a grievance that the executor refuses to resolve, they can file a claim against the bond. The surety company that issues the bond will then investigate the claim, using legal proceedings as necessary. If a claim proves valid and the executor (known as the principal) still refuses to pay, the surety agrees to settle the claim. At that point, the executor must pay the surety back, along with interest and accumulated fees.
How Much Does an Executor Bond Cost?
That depends on the value of the bond, which is typically set by the probate court. The bond costs a small percentage of the total, around 5%. When you submit a bond application, underwriters will evaluate your credit history and use that to quote a premium price, so it could be higher or lower depending on things like credit score or a history of bankruptcy. Bonds remain active for 12 months after the premium is paid. To renew, the underwriters will look at your credit again and calculate a new premium price, meaning you could pay less or more on an annual basis. Plan on keeping the executor bond for as long as you hold that position.
Who Needs an Executor Bond?
These bond are usually but not always required. If a will names an executor, it may also stipulate that a bond is (or possibly isn’t) required. Probate courts can also require an individual to get a bond before being allowed to oversee an estate. In most cases, it’s clear to anyone under consideration for an executor position whether they need a bond. At that point, find a trusted surety to work with as quickly as possible so that the business of the estate can proceed.
How to Obtain an Executor Bond
Step one is to find a surety company that can issue a bond in your state that also meets the conditions set out in the will or by the probate court. Then you will need to submit a bond application, which requires information about your background and finances. You may also be asked to supply court documents, a schedule of the estate’s assets, identification of probate attorneys involved with the proceedings, or a personal financial statement. Bond underwriters will use that information to quote you a price for the bond premium, and once you pay, the bond becomes active. Securing a bond will not be the only requirement for being allowed to serve as executor, but it’s an important step along the way.
Apply for an Executor Bond With Viking Bond Service
Executors have their hands full with their obligations to an estate. You don’t want to be distracted with bond issues, so it’s important to team up with the right surety company from the start – one that can get you a competitive bond quote as quickly as possible. Viking Bond Service has become a nationwide leader by making the bond process easy and accessible to all. If you have questions about your specific bonding needs, use the contact form on this page, or reach us immediately by calling 1-877-278-2564. If your goal is to get approved for a bond ASAP, fill out the online application to get the process started immediately.