When serving as the Administrator or Executor of a loved one’s estate, the Surrogate’s Court may require you to obtain something called an bond. An Administrator Bond or Executor Bond is similar to an insurance policy for the creditor and beneficiaries of the estate that will protect them in the event that the Executor or Administrator, also known as a fiduciary, does not properly pay out the estate assets. Unlike most insurance policies however, the “insurer” can sue the fiduciary after it pays the claims of the beneficiaries or creditors.
If the Administrator or Executor acts inappropriately during the course of their duties, an Administrator Bond or an Executor Bond provides protection to the beneficiaries or heirs of the estate by allowing them to file a claim with the bond company for reimbursement. The bond company will then make a determination about the validity of the claim and then encourage the Executor or Administrator to make good on the payment. If the Executor or Administrator is unable or unwilling to make payment to the beneficiary, the bond company will pay out the amount owed to the beneficiaries. However, unlike with an insurance policy, the bond company will want to be paid back. The fiduciary’s obligations under the agreement between themselves and the Bond company will determine how repayment is made. The bond company may pursue the Executor or Administrator’s personal assets for repayment.
While Surrogate’s Courts do not always requires a bond, they will often ask you to obtain one if there is a conflict between yourself (the fiduciary) and any heirs or beneficiaries of the estate. Some judges will also issue a bond requirement if the decedent’s estate owns any real estate which will need to be sold, which is typical in Bronx County. If the Surrogate’s Court requires the nominated Fiduciary to obtain a bond they may do so by contacting a bond company who is familiar with the respective Surrogate’s Court. They will then complete a bond application and agreement. After you have entered into an agreement with the bond company you will pay a bond premium which is based on your credit score and the size of the estate in question. For example, if the decedent’s estate is valued at $200,000-$300,000, the bond premium will likely be somewhere around $1,000, give or take. After you have paid the premium and obtained the bond, you will file it with the court to demonstrate that you have met the court’s bonding requirement.
There are some cases in which it is not possible for the named or nominated Administrator or Fiduciary to obtain a bond. This would most likely happen due to a poor credit score or financial history. Bond companies will not issue a bond to you if they deem you to be a financial risk. If the court requires a bond and you are unable to get one, the court will likely suggest that someone else serve as Executor or Administrator as they usually don’t have difficulty obtaining a bond.
The bond premium is usually paid yearly until it is terminated. Termination can occur in two ways: (1) having every beneficiary sign forms acknowledging receipt of all assets due to them, or (2) conducting a judicial accounting and obtaining a court order permitting termination of the bond. In both cases, the fiduciary will need to provide an accounting of all estate assets and how they are being distributed.
If you find yourself with questions regarding fiduciary bonds in Surrogate’s Court for a NY estate lawyer feel free to contact the Law Offices of Roman Aminov at 347-766-2685 for a free phone consultation.