What Is a Personal Representative Bond and Surety on the Bond?
A personal representative is the person selected, either through a will or by the court, to manage the assets of an estate and dispense with them according to the will or to the rules of intestate succession. In some cases, the personal representative will have to take out a surety bond to protect beneficiaries of the estate against fiduciary misconduct.
-
Function
-
In most states, whether the personal representative has to take out a surety bond is left up to the will itself or the discretion of the court, whether on its own or by motion of an interested party. If the personal representative fails to dispense the estate assets in the best interest of the lawful beneficiaries, they can move the court to award damages. The purpose of the bond is to ensure from the outset the personal representative's ability to pay those damages.
Features
-
The obligees of a personal representative bond, that is to say the beneficiaries, are the persons having an interest to assets in the estate, or the state in which the probate court is established, who then awards the funds to the beneficiaries. These are ultimately the people to whom the personal representative has a fiduciary duty. The surety of the bond will be whatever underwriter issues the bond, and their function will be to pay out on valid claims against the bond and seek compensation from the personal representative if possible.
Size
-
The size of a personal representative bond is usually at least equal to the estimated value of the estate assets. In some cases, the court requires a bond of 110 to 150 percent, to cover potential costs and legal fees associated with obtaining judgment against the personal representative.
Considerations
-
The personal representative is, by law, entitled to receive compensation for their services to the estate, and this is paid directly from estate assets. The costs of obtaining a personal representative bond may also be shouldered by the estate. Interested parties should therefore weight the costs and benefits before moving to require a bond.
Effects
-
The process for acting on a personal representative bond varies by state. In Montana, for example, an interested party, usually a beneficiary of the estate, must move to have the personal representative removed for breach of fiduciary duty. They, or a new personal representative, can then initiate a new proceeding in the probate court to establish a claim against the surety bond, and may repeat this process until the full extent of the bond has been exhausted.
-
Related Searches
Resources
- Photo Credit Cimexus (CCA 2.0)
