Fiduciary bonds, often called probate bonds or receivership bonds, are generally not thought of until they are actually needed. When they are called upon, attorneys and their clients will be relieved that the bond was there to ensure that the fiduciary performs the duty that was set before them.
A Common, but Complex Layer of Protection
Fiduciary bonds are common, but when introduced into the a legal dispute, estate planning process or other litigation, they are often treated as an afterthought. Between formulating a will or trust, selecting beneficiaries, establishing a guardianship or conservatorship, attorneys and their clients have enough to keep them busy. When combined with the fact that the process for procuring a fiduciary bond can be complex, and attorneys and their clients can spend time, energy and money to shop around for surety bond resources, the process is often passed on to insurance agents or similar parties without the proper knowledge or experience needed to properly establish the bond.
Attorney don’t have to understand the intricacies of the business, but they and their client should be informed of the basics of the process, that way they will know precisely how the assets are being protected.
A Quick Overview of the Four Major Types of Fiduciary Bonds
When it comes to fiduciary bonds, or surety bonds in general, there are dozens of types. It’s complex, so that each bond can be crafted to cover very precise circumstances. There are four major situations in which courts can order bonds regarding estates:
- Conservatorship/Guardianship Bond: to protect the assets of a minor or someone who has a disability/is incapacitated.
- Personal Representative Bond: to protect the assets of a decedent’s estate.
- Trustee Bond: to protect the assets within a trust or special needs or supplemental needs trust.
- Receiverships: courts can appointed a fiduciary to oversee a struggling business in order to preserve assets or ensure bills are paid.
In order to approve of these bonds, the court must review the written bond and confirm it complies with the court order.
Issues Regarding Bonds
There are a few major issues attorneys and their clients may encounter when going through the bond process:
- The surety flags the bond application during the underwriting process.
- The court doesn’t approve the bond (surety isn’t properly licensed in the state, or the bond is not executed properly or may not comply with the court order).
- Difficult time constraints when trying to obtain a bond to comply with a court order.
If the court does not approve of a bond, attorneys must quickly contact the bond agency so that they can rectify the issues.
If the surety provider encounters a red flag during the underwriting process, it is up to the attorney and client to resolve the issue before the bond can be created. Some major issues that sureties will generally flag are:
- Bonds that are being requested while the estate is being administered.
- Disputes between family members that are currently being litigated.
- The fiduciary is running a business within the estate.
- The fiduciary has long-term, significant financial debts or obligations and/or bad credit
Facilitating the Process
To help speed the bond process along, attorneys can look to bond agencies to help them find the best surety for their client, rather than doing the legwork themselves. Bond agencies are well connected with surety providers and can help find the best fit for a client based on their particular situation.
At the Patrick J. Thomas Agency, our team takes the time to personally procure bonds for our clients while seeing them quickly through the entire process. Our procurement process is easy for attorneys to navigate and even easier for their clients to understand. To procure your fiduciary bond today, contact our team to get started.
Disclaimer: this is for informational purposes only and is not intended to be legal advice. If you need legal counsel, please contact an attorney directly.