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Executor Bonds

As the person who manages the careful distribution and resolution of an entire estate, executors have many responsibilities. So many, in fact, that the average estate takes 16 months to settle and requires 570 hours of work on the part of the executor. People should know what they're getting into before accepting the position, and they should know all the obligations that accompany the role - including the responsibility to obtain an executor bond. Here, the team at Viking Bond Service will tell you everything you need to know about this particular type of bond.

What is an Executor Bond?

Executor bonds, also known as estate surety bonds, offer a form of insurance for the beneficiaries of a deceased person's will or estate. The bond provides an additional incentive for the executor to manage the estate correctly, absent of illegal or fraudulent actions. Executor bonds are provided only when deemed necessary by the probate court. When applying for the surety bond, one of the documents required is the court order establishing both the bond requirement as well as the amount of the bond. Executor bonds are just one type of a larger category of bonds known as probate bonds - which apply to many instances when someone is appointed to manage the transfer of estate assets.

How Does an Executor Bond Work?

Typically, an executor is defined in a deceased individual's will. However, if the deceased person did not name an executor, a probate court will appoint one. In this instance, the probate court may require an individual to file an estate surety bond. By doing so, the probate court provides an additional incentive for the executor to manage the estate in a manner that adheres to the will and/or applicable regulations and laws. The bond provides a form of financial guarantee. It allows beneficiaries of the estate to file a claim against the bond seeking financial compensation if they believe the executor has mishandled assets belonging to the estate. If that claim proves valid upon investigation, the company that issues the bond agrees to settle the claim, in the event that the executor refuses to pay. In that way, people associated with the estate know they won't have to bear the financial consequences of misdeeds committed by the executor.

Who Should Get an Executor Surety Bond?

An executor plays a key role in managing a deceased individual's finances, real estate and other assets. He or she may be responsible for a number of actions, including:

• Creating an inventory of an estate's assets
• Reaching out to beneficiaries and potential heirs
• Getting an estate appraised
• Paying off an estate's debt
• Calculating and paying off taxes
• Distributing the estate's assets
• Protecting the estate's assets
• Ensuring the will is filed properly

With an executor bond, family members, heirs and other stakeholders are protected in the event that an executor fails to act properly. An executor bond offers protection against fraud, embezzlement and other illegal acts that may be completed by an executor, making it an exceedingly valuable tool. A will may stipulate that the executor be backed by a bond, or probate courts may stipulate this. If there's any doubt about whether you need a bond, contact the nationwide bond experts at Viking Bond Service.

What are the Parties Involved in an Executor Surety Bond?

The easiest way to understand how these kinds of bonds work is to look at the three parties involved:

• Principal - The executor is the principal. The principal must obtain a bond before being allowed to serve as executor, renew the bond for as long as they serve as executor, and pay for any claims filed against the bond because of their conduct managing the estate.
• Obligee - The beneficiaries of the estate are the obligee(s). The obligee has the right to file a claim against the bond, seeking compensation in the same amount they believe has been stolen or lost from the estate.
• Surety - The company that issues and administers the bond is the surety. The surety agrees to guarantee payment for all valid claims, but if they do pay on behalf of the principal, the surety has the right to seek repayment (plus interest and fees) from the principal.

How Much Does an Executor Surety Bond Cost?

Many factors are considered when determining the cost of an executor bond. The cost is presented as a percentage of the bond amount. The proposed executor's credit and financial strengths are heavily considered when determining cost. A surety may also require these bonds to be collateralized to help mitigate some of their risk. Usually, these bonds are quoted within 1% to 4% of the bond amount. However, the quotes can come in lower or higher than the range depending on the qualifications of the principal, the proposed executor seeking bonding. To give you an example of the executor bond cost, if the bond amount (the total the surety will pay out on behalf of the bond) is $100,000, the principal may pay around $1,000 to obtain the bond, and repay the premium on an annual basis for as long as the bond is required.

How are Claims Handled for Executor Surety Bonds?

In most cases, people who have issues with an executor will alert that person before filing a claim against the bond. The bond only becomes important when the executor refuses to reconcile the issue amicably. In that case, the obligee can file a claim against the bond outlining the grievance and quantifying the damage. At that point, the surety will advise the principal (the executor) of the claim, giving the principal an opportunity to handle the situation. If the principal cant resolve the issue, the surety will launch an investigation to determine the validity of the claim. For valid claims, the surety will once again reach out to the principal for payment. If those efforts fail, the surety agrees to settle the claim in full. Now the principal owes the surety instead of the obligee, and the principal must pay back the original claims amount, plus the cost of investigating the claims and interest.

How to Apply for Executor Surety Bonds?

You will be informed if an executor surety bond is needed in your case. If one is required, a probate court will not name an executor until the bond is officially filed. To acquire an executor bond, an individual will need to submit an application. This individual will need to show that he/she can serve as a responsible and ethical executor. As such, the individual will need to provide details about his or her financial and personal history. Furthermore, an executor bond provider will require an individual to agree to a credit check and provide any other relevant information. Some applicant's will need to supply additional documentation at the surety agencies' request. Underwriters (risk assessors) at the surety agency will use all the documents provided to estimate how likely you are to cause claims to be filed against the surety bond. Furthermore, if the surety settles claims on your behalf, the surety wants to know how likely you are to pay that debt back.

How to Choose a Surety Agency

Obtaining a surety bond may not be at the top of an executor's list of priorities. Nonetheless, you must have an executor bond before they can legally perform the duties of an executor. The choice of a surety agency is an important step that will affect everything that comes afterwards. With so many surety agencies to choose from, it's difficult to vet options and identify the best choice for an individual executor. That being said, it's important to choose a surety agency quickly (yet confidently) so that bonding issues don't inhibit you from becoming an executor or prevent an estate from being disbursed in a timely manner.

There are lots of things to look for in a surety agency. First and foremost, it must be able to offer executor surety bonds in whatever state the executor lives in. Beyond that, a surety agency should make it easy to apply for a surety bond, should return quotes for surety bond premiums in a timely manner, and should do everything possible to make bonds affordable for all applicants. Closely related, the best surety agencies in America make an effort to work with applicants who have less than perfect credit history. Rather than turning these "high-risk" applicants away, surety agencies that truly care about clients will use whatever resources they have at their disposal to get more people approved for surety bonds. Where can you find a surety agency that sets a model for others in the industry? By connecting with Viking Bond Service as soon as you're aware you need an executor surety bond.

How to Renew a Executor Bond

Estates can take months or years in some cases to fully resolve. Executors may be involved with an estate for so long that they need to renew their bond. Viking Bond Service sends out a renewal notice once the bond gets close to its expiration date, which typically happens 12 months after it's first issued. Renewing the bond works very similar to applying for the bond initially. You will need to complete a bond application and agree to a credit check. Underwriters reevaluate your risk and credit worthiness every time you renew because if your credit has gone up or down since you first applied, your risk has too. Underwriters may calculate a new surety bond premium every time you renew based on your credit health at the time of renewal. Consequently, premiums can go up or down compared to the previous cost. One way to manage the long-term cost of bonding is to improve one's credit. Remember, the higher the credit standing the lower the surety bond premium.

Request an Executor Bond Quote

Viking Bond Service agents have well over a decade of experience providing executor surety bonds for our clients. We let our clients know exactly what will be needed to obtain the bond and we seek to get the best rate and terms for the bond. When you're ready to connect with one of our experts directly, call us at 1-888-278-7389, or fill out the contact form on this page. For those of you who are ready to get the bond process started, take a few minutes to complete our easy online application.