Estate surety bonds strike fear in the hearts of many. After all, they can seem utterly overwhelming at first glance. But luckily, you’ve found ConstructionBond! We’re here to tell you everything you need to know about estate surety bonds and even how we can help you obtain one.
In this article, you’ll discover the various types of estate bonds, the application process, and the average costs. By the end, you’ll be well-versed in all estate surety bond matters.
Estate surety bonds are most often used in two scenarios:
In the former case, a type of estate surety bond is used to protect incapacitated people or minors against poor management by the legal guardian. The process of appointing a legal guardian is as rigorous as you may imagine:
In the latter scenario (estate administration), estate surety bonds protect the creditors and beneficiaries of the estate against incorrect asset distribution by the executor. The bond ensures the executor will disperse the assets according to the court judgment or will.
Sometimes, these bonds are necessitated by the court for a plethora of reasons, meaning the executor won’t obtain a probate certificate until they provide a bond.
Think of estate surety bonds as your security blanket issued by insurance companies following a straightforward application procedure. It’s an added shield deemed essential by the court.
As we’ve just alluded to, different kinds of estate surety bonds exist for various situations. Find out more about each type below:
The courts require a guardianship bond from somebody who has been nominated to manage the financial affairs of an individual deemed legally incapable of handling such matters themselves. Typically, the bond covers disabled persons, minors, and older adults and guarantees the appointed guardian will act in the best interests of the third party.
Put simply, it’s a certification of execution that secures the assets and funds of the individual under the Substitute Decisions Act 1992.
An administration bond acts as a guarantee that the executor of the estate remains honest in performing their duties while administering the estate to the beneficiaries.
It’s usually required when somebody passes away without a will to promise all actions performed by the executor are ethical and legal. But it may also be necessary for these circumstances:
According to the Estates Act R.S. O. 1990, c. E.21, the administration bond amount must equal double the amount of the deceased’s assets. But, the court retains the right to request more than one bond or even reduce the amount in certain circumstances.
Since the application process for administration bonds is rather lengthy, many executors seek to remove the bond requirement by court order. For the court to approve the request, the executor must convince them that the creditors’ and beneficiaries’ protection is either not required or will be met. Unfortunately, the Estates Act doesn’t set out any circumstances where this will be granted, making the whole process quite elusive.
With that said, the Ontario Superior Court of Justice has provided guidance on when the court will dispense the bond. As per the directive, the need for an administration bond is often dispensed when:
If an executor doesn’t reside inside the jurisdiction of the court dealing with the estate, some Canadian provinces require the executor to post a foreign executor bond. It ensures they will perform all the necessary duties legally and ethically.
Foreign executors (i.e., those living outside of the court’s jurisdiction) often need to file this surety bond before they’re afforded the letters of probate (known as the certificate of appointment of estate trustees in Ontario). The bond holds the executor accountable if the assets are mishandled outside the country.
In cases where the estate is complex, expansive, and/or has multiple beneficiaries, the court may still request a foreign executor bond to protect each individual.
If there is more than one executor handling the estate, the person who holds the most considerable management portion and controls most of the assets determines the estate’s residency. In the event of equal management, the residency is typically determined based on where most of the trustees live.
The court may request an estate administration bond from you as an executor of an estate in a variety of circumstances, including:
The court deems it necessary due to at least one of the above; they believe the beneficiaries are vulnerable and/or the estate has complexities that warrant the bond protection.
You might also need an estate surety bond if you’re a legal guardian of property. As we mentioned previously, the applicable governing body decides whether a bond is required on a case-by-case basis.
Since estate matters can be convoluted, working with an experienced broker is essential. Luckily, we have exceptional relationships with the country’s leading brokerages and agents. All you need to do is fill in our simple request form, and we’ll assign a highly-skilled broker specializing in property matters.
Estate administration bonds’ and guardianship bonds’ costs are calculated differently.
To work out the cost of an estate administration bond, you need to find out the rate and multiply it by the bond’s value. But as you can imagine, that is easier said than done because the rate changes depending on:
Generally speaking though, the rates sit somewhere between 0.3% and 1%. So, if your estate is $1 million and the rate is 0.55%, the bond will cost $5,500. It’s a one-time payment that you must make once the bond is issued.
Most bond providers bill guardianship bonds annually based on a predefined yearly rate. That means for every year you need the bond, you must pay the fee.
Similar to administration bonds, the strength of your application and the bond’s size determines the rates. However, the rates are much lower, ranging from 0.25% to 0.5% per year.
With that said, some bond companies are prepared to offer you a one-time fee option when acquiring guardianship bonds. If you choose this route, the fee usually sits between 1.5% and 2.5%, but the savings are mighty on decades-long guardianships.
Acquiring an estate surety bond can be time-consuming and convoluted without proper guidance. So, take a moment to familiarize yourself with the general process below:
In most provinces, you need to work with an insurance brokerage. They act as a mediator between you and the bond issuer and guide you through the entire process.
However, choosing a broker can be a task in itself! Estate surety bonds are a niche market, so it’s a recipe for disaster if your broker doesn’t specialize in the area.
The good news is that we can find an experienced estate surety bond brokerage for you! Just fill in our secure online quote form, and we’ll assign a specialist broker to your case.
Depending on the estate’s structure, bond issuers have requirements you must meet to qualify for a bond. These include but are not limited to:
The brokerage working with you will also request documents, such as:
In the following circumstances, you might need to comply with extra requirements:
Upon approval, the bond form is offered by the court and completed by your brokerage. You’ll need to sign and witness the bond before your lawyer files it in court.
Our years of experience connecting specialist brokerages and agents with professionals like you guarantees excellence every time. We make acquiring bonds and insurance coverage simple by affording you the expertise and time you deserve to make the right decisions.
Only one five-minute online form stands in the way of you and your dream bond solution. Alternatively, you can use our toll-free number to speak directly with one of our friendly team members.
Let us do the hard parts for you.
Getting an estate surety bond can be relatively quick if you submit the request documents in a timely fashion. Usually, you should expect to wait between one to two business weeks between sending the documents and finalizing the surety bond.
As an estate executor, you have many duties, including:
Once the transactions and distributions are complete, you must present a final account to the court. Additionally, the court might order annual accounts if it takes you longer than 12 months to fulfill all the above duties.
Bond companies consider your financial stability when you apply for an estate administration bond. However, at ConstructionBond, we pride ourselves on helping those with poor credit statuses get the bonds they require. So give us a call to find out more.