Estate Surety Bonds, Explained

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.


What Is an Estate Surety Bond?

Estate surety bonds are most often used in two scenarios:

  • During the management of somebody’s property by an appointed legal guardian
  • Throughout an executor’s estate administration

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:

  1. First, you must apply to the governing entity, like The Office of the Children’s Lawyer or the Public Guardian and Trustee.
  2. Then, you submit a management plan.
  3. Once approved, you become a legal guardian. However, it’s worth noting that some governing bodies only approve management plans subject to acquiring a guardianship bond.

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.


The Types of Estate Surety Bonds

As we’ve just alluded to, different kinds of estate surety bonds exist for various situations. Find out more about each type below:


#1 Guardianship Bond

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.


#2 Administration Bond

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:

  • An application for a certification of appointment with a will is made, but there isn’t an appointed executor
  • An application for a certificate of appointment with a will is made, but the appointed executor isn’t an Ontario resident

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:

  • all beneficiaries are of age, independent, and consent to the approval of the order.
  • all debts are paid, or the affidavit lists the owed debts.
  • the judge is happy all creditors are protected.


#3 Foreign Executor Bond

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.


Who Needs An Estate Administration Bond?

The court may request an estate administration bond from you as an executor of an estate in a variety of circumstances, including:

  • No will exists
  • Estate trustees do not live in Canada
  • Some of the estate’s beneficiaries are minors
  • There’s an active business on the estate

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.


How Much Do Estate Administration Bonds Cost?

Estate administration bonds’ and guardianship bonds’ costs are calculated differently.


The Cost of Estate Administration Bonds

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:

  • the size of the bond.
  • the simplicity of the situation.

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.


The Cost of Guardianship Bonds

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.


How Do You Get an Estate Surety Bond?

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:


#1 Choose Your Broker

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.


#2 Know The Requirements

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:

  • Applicant’s stability and character — Bond companies like to see you have a well-established career, especially if you have a background in law or accounting. Financial security is another metric because you’re less likely to misuse estate funds if you’re economically sound.
  • The presence of a lawyer — Retaining an attorney ensures the rules provided in the estate settlement are followed. Plus, it increases the chances of no misappropriation. Even though it’s an added expense, hiring a lawyer saves money and time long term.
  • Co-applicant — Sometimes, bond companies want to see the attorney named as a co-principal on the estate bond. It’s usually done in cases where the estate is large or complicated.
  • Joint control agreement — The attorney might have to co-sign all estate-related transactions that exceed a pre-determined limit. It provides an extra layer of comfort for the bond company.

The brokerage working with you will also request documents, such as:

  • A completed bond application
  • Your personal net worth statement
  • The will or management plan
  • Inventory of the estate


#3 Handle Any Complications

In the following circumstances, you might need to comply with extra requirements:

  • Minors as beneficiaries — In this scenario, the estate can’t be finalized until the minors reach the age set out in the will or the age of majority. It creates problems because the estate remains outstanding for numerous years. Higher bond rates might apply here since additional underwriting is needed.
  • Estate has an ongoing business — Often, the individual was an owner or shareholder of a company that continued to operate after the person’s passing. In this circumstance, the shares have to be sold, or the business passed on before the estate can be settled. You must give the plan to handle the sale or transfer of ownership and the beneficiaries’ written consent to the bond provider.
  • The applicant is indebted to the estate — Here, you need to reassure the bond company that all debts will be repaid before they’re willing to issue the bond.


#4 Approval

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.


Why Choose ConstructionBond?

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.


Frequently Asked Questions


How Long Does It Take to Get an Estate Surety Bond?

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.


What Are The Estate Executor’s Duties?

As an estate executor, you have many duties, including:

  • Paying all creditors of the estate
  • Filing a list of the estate’s assets and liabilities with the court
  • Distributing any remaining assets to the beneficiaries
  • Accounting for all transactions

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.


Can You Get an Estate Administration Bond with Bad Credit?

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.