As discussed in a previous post, being appointed a Personal Representative of an estate can take lots of time and work. Besides this time and work, in some instances described below, the probate court will require a bond on the Personal Representative.
A bond is issued by one party, the surety, who guarantees that the Personal Representative will perform his or her duties, or the surety will pay a sum of money should the Personal Representative fail in his or her duties – namely, in managing the estate’s assets.
When a Bond is Required
Typically, in informal probate proceedings, no bond will be required, unless the following situations apply:
- A special administrator is appointed;
- If the decedent’s Will expressly requires a bond; or
- Any person with an interest in the estate worth in excess of $1,000 or a creditor with a claim against the estate in excess of $1,000 demands a bond.
In formal probate proceedings, a bond is not required if:
- The decedent’s Will relieves the Personal Representative of a bond; or
- All interested persons with an interest in the estate in excess of $1,000 make a written request that no bond be required.
Regardless, the court in its own discretion may require a bond at the time of appointment of the Personal Representative. Likewise, the court on its own motion or on the petition of the Personal Representative or other interested person may excuse the requirement of a bond or increase or reduce the amount of the bond.
Obtaining a Bond
If a bond is required, then the court will generally set the bond for the approximate amount of the decedent’s probate estate. The Personal Representative must then work with a surety company to obtain the bond. Typically this process entails the bond company conducting a background and credit check on the Personal Representative. Once issued, the bond should be filed with the court. Until the bond is filed with the court, the Personal Representative must refrain from exercising any powers except as necessary to preserve the estate.
Once the bond is issued, a yearly premium (generally 1% of the bond amount) will be due to the surety company. This expense is considered an administration expense of the estate, so can be paid out of the decedent’s estate.
As long as the Personal Representative performs his or her duties in administering the estate, the bond will terminate once the estate is officially closed. If the Personal Representative fails to properly execute his or her duties (i.e., run off with the estate’s money), then the surety will pay the bond amount directly to the court and then look to the Personal Representative directly for recovery.
