Trustee Bond

What is a Trustee Bond?

A trustee bond is a type of surety bond that provides protection for the beneficiaries of a trust in the event the trustee does not administer the trust according to its instructions or the law in the state where the trust is being administered.  

Trustees are generally required to obtain these types of bonds before they can begin administering a trust in their state. 

What is a Trustee?

When a person forms a trust — a legal document dictating how a person’s assets will be distributed to certain beneficiaries  they choose someone to administer their assets based on the rules written into the trust. This person is known as the trustee. 

trustee is an individual that holds the legal authority to manage property or assets in order to administer them for a beneficiary.  General duties and responsibilities of a trustee include protecting the trust, fulfilling the terms of the trust, informing beneficiaries of any actions and remaining impartial among the beneficiaries. 

Not all trustees oversee trusts set up by a person. There are many different types of trustees, including bankruptcy trustees, corporate trustees, etc. There are also several different types of trusts. The terms of revocable trusts can be changed up until the settlor (the person who owns the assets) passes away, while irrevocable trusts cannot be changed without the permission of the beneficiaries. 

Trustees can be supervised by the court or unsupervised depending on how the trust is drafted and set up. A deed of trust is the document that can appoint a trustee and is similar to a power of attorney. An unsupervised trust can be a dangerous tool to use to protect assets because there is little supervision or accounting over the trustee. 

How Trustee Bonds Work

In most cases, trustees are required to obtain a trustee bond in order to assume their duties. Trustee bonds provide protection for the beneficiaries. If the trustee commits fraud, fails to fulfill their obligation as a trustee or commits any sort of malfeasance, the beneficiaries can make a claim against the trustee bond and obtain financial recompense. The bond must be obtained by the trustee, even though it protects the beneficiaries. 

Minnesota Trustee Bonds

For more information about Minnesota trustee bonds and how to obtain them, contact The Patrick J. Thomas Agency.