Fiduciary Bonds

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What is a fiduciary bond?

A fiduciary bond protects a beneficiary by ensuring the party in charge of their business interests and finances (the fiduciary) fulfills their duties ethically and lawfully. 

Probate courts require fiduciaries to post fiduciary bonds to hold them accountable for executing their role faithfully. Specific fiduciary roles can vary. Common fiduciary relationships include: 

  • Guardians
  • Executors
  • Trustees
  • Conservators
  • Personal representatives
  • Administrators

Each of these roles requires a specific fiduciary – or probate – bond type. Here are some of the most common…

Common Types of Fiduciary (Probate) Bonds

  • Guardianship bonds: A guardian is appointed to care for a minor (whose parents can no longer care for them) or an elderly or disabled adult. The legal guardian can make decisions regarding finances and other affairs for the person in their care. Learn more about guardianship bonds.
  • Executor bonds: Someone may name an executor in their will before they die. This person or organization becomes responsible for compiling the decedent’s assets, distributing their estate, and paying any outstanding debts and taxes. Learn about executor bonds. 
  • Administrator bonds: If someone doesn’t execute a will before they die or an appointed executor can’t perform their duties, the probate court may appoint an estate administrator. This person is responsible for gathering the assets of the deceased person’s estate, paying their outstanding debts, and distributing their assets legally. Learn more about administrator bonds.

Get Your Fiduciary Bond:

Quick Takeaways

  • A fiduciary bond protects a beneficiary by ensuring the party in charge of their business interests and finances fulfills their duties ethically and lawfully. 
  • Many states require surety bonds when a probate court appoints a fiduciary. 
  • The bond requirement will usually be equal to or higher than the value of assets (the estate) the fiduciary will manage, excluding real property. 
  • Types of fiduciary bonds include guardianship bonds, executor bonds, conservator bonds, administrator bonds, personal representative bonds, and receiver bonds.

What is a fiduciary?

A probate court appoints a fiduciary to manage another person’s business affairs and finances. In other words, they’re granted power over someone else. On the most basic level, a fiduciary offers another person financial advice and makes financial decisions on their behalf.

Typically, a person who may soon die or become incapacitated will nominate someone to fill a fiduciary role. This is often a child, spouse, or another close relative. However, a probate court judge will appoint someone else if no relatives wish to fill the position. A fiduciary can be a trustee, guardian, administrator, executor, or another. 

Examples of people who may name a fiduciary:

  • Someone writing their will names an executor (as the fiduciary) to take care of things after they pass.
  • A person writing a will sets up guardianship (naming the new guardian as the fiduciary). This often occurs when parents or legal guardians have children under 18 who require care and protection.
  • An elderly adult can no longer manage her finances and cannot nominate a fiduciary, so the court appoints one for her. For example, a daughter may take over her mother’s estate.

What do fiduciary bonds guarantee?

A fiduciary bond guarantees that a court-appointed fiduciary performs their legal duties ethically, following all regulations for fiduciaries in their state, county, or city. These bonds protect beneficiaries and creditors by ensuring the fiduciary fulfills their obligations faithfully. If the fiduciary acts dishonestly or against the beneficiary’s best interests, they’ll be held financially liable for any damages they cause.

Here are some common examples of fiduciaries taking advantage of their role, which can lead to costly claims.

  • Estate theft
  • Fraud
  • Manipulation
  • Embezzlement 
  • Misrepresentation

How do I know if I have a fiduciary bond requirement?

Many states require bonding when a probate court appoints a fiduciary (administrator, guardian, executor, etc.). Here are some instances where a bond may be required:

  • Some states require fiduciary bonds if someone dies without leaving a valid will or doesn’t explicitly omit the bonding requirement in their will (via a waiver).
  • A creditor or beneficiary may request a bond to hold the fiduciary accountable and ensure they faithfully fulfill their duties. This often occurs when beneficiaries or creditors are concerned about the fiduciary’s loyalty.

Keep in mind that not all nominated fiduciaries need bonds. The court will notify you if this is a requirement. If it is, it’s essential to get bonded by a reputable surety provider who can issue your bond swiftly and securely to avoid potential legal issues.

Who doesn’t need a fiduciary bond?

Sometimes the fiduciary is an organization – like a bank or trust company – rather than an individual. A bond typically won’t be required in this case since it’s a low-risk scenario. A bond may not be required if the assets being managed are real property, either.

Frequently Asked Questions

A fiduciary bond is a three-party agreement between an obligee, a principal, and a surety.

  • Obligee: The court that requires the bond
  • Principal: The fiduciary who must purchase and post the bond and abide by its terms
  • Surety: The financial company that issues the bond and backs it financially

If the fiduciary breaks their bond agreement, the surety must step in to cover any costs associated with the bond claim. A claimant can file a claim up to the bond limit, which is often based on the number of assets (other than real property) the fiduciary controls. Ultimately, the fiduciary must repay their surety for all claim-related expenses.

Your state laws will determine your fiduciary bond requirement. It’s usually equal to or higher than the value of assets (the estate) you’ll manage, excluding any real property. To purchase this bond, you will pay a premium – a small percentage of the bond amount. Fiduciaries are often responsible for bearing the bond expense. 

For example, if you need a bond to cover assets worth $300,000 and your premium rate is 1%, you’d pay $3,000 for this bond. If you need a bond to cover a $50,000 estate, you will pay $500 at a 1% rate.

Executors and fiduciaries are different, but an executor can fall into the fiduciary category. Remember that a fiduciary is a person the court appoints to manage someone else’s business affairs and finances. Its most basic definition is one party acting on behalf of another. 

An executor is named in someone’s will to carry out the will’s terms after someone dies. The executor is still acting on another’s behalf (fiduciary), but their role is more specific.

Some of the most common types of fiduciary bonds include guardianship bonds, executor bonds, conservator bonds, administrator bonds, personal representative bonds, and receiver bonds.

How to Get a Fiduciary Bond in Your State

Complete our simple online fiduciary bond application and then pay for and print your bond! If you have any questions or want us to walk you through the application process, call us at 888-435-4191. We’re always more than happy to assist you!

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About ZipBonds.com

Founders Ryan Swalve and Zach Mefferd formed the vision for ZipBonds.com when they realized how overly complicated it was to help clients place surety. The frustration of being unable to incorporate the technology they’d used in other insurance-focused projects left them thinking “there has to be a better way.”

Fast forward a couple of years, and that better way is the impetus of everything we do at ZipBonds. We constantly look for innovative ways to improve the bonding process for our clients and agents. Our team comprises individuals who understand all angles of surety – for companies, agencies, and individuals. Incorporating everyone’s point of view to improve the process while simultaneously integrating cutting-edge technology is what sets our business apart.