What is a Probate Bond? Do I need one?

A Probate bond is a type of court bond that protects the beneficiaries and creditors of an estate in the event the Personal Representative fails to perform their duties or commits fraud. The primary purpose of a California probate bond(or California fiduciary bond)is to ensure that the Personal Representative performs their responsibilities without causing loss to the estate.

In case an estate Executor, Administrator, or other Personal Representative fails to perform their duties, the aggrieved party can petition the court for a surcharge against the Personal Representative. If the court grants that petition and the Personal Representative cannot or will not pay, the Surety will pay out on the bond.

A Probate bond is an agreement between three parties: the Principal, the Obligee, and the Surety.

The Principal is the party that gets the bond (the Executor, Administrator, Conservator, Trustee, or Guardian of an estate). The obligee is the party that is protected by the bond and sometimes requires the Principal to get bonded and the Surety is the entity that issues and financially guarantees the bond.

While a Probate bond can be considered similar to an insurance policy, there is one major difference. Unlike an insurance policy, a probate bond protects the beneficiaries and creditors of an estate, instead of the principal.

What is Probate?

Probate is the legal process through which a deceased person’s property is distributed among the beneficiaries or heirs.

The probate process usually consists of these steps

1.  A person files a petition in a court seeking appointment to manage an estate.
2.  Once their request is granted, the Administrator/Executor notifies heirs and creditors of the court’s decision.
3.  The Administrator or Executor identifies all estate assets and transfers legal ownership from the creator to the   estate.
4.  The Administrator or Executor uses the estate to pay funeral expenses, debts, and taxes.
5.  The Administrator or Executor, upon having been given specific permission, distributes the remaining assets   among the beneficiaries or heirs and notifies the court that they have carried out their duties.

Throughout the Probate process, the Administrator or Executor has access to estate assets and controls them. They have a fiduciary duty to manage estate assets responsibly, honestly, and in good faith. A Probate bond is used to ensure that the Administrator or Executor acts in good faith.

Do all Administrators and Executors of Estates Need Probate Bonds?

An estate Administrator/Executor will generally need to get bonded unless the Will waives the requirement or in the event there is no Will, each of the heirs are adults and have signed a waiver waiving the requirement of a bond

A testator usually includes a waiver in their Will if they trust the Executor to act in good faith. If there is no Will and the adult heirs agree that a bond is not required, the Probate court can make an exception and allow the Administrator to manage estate assets without securing a bond.

Even if the heirs trust the Administrator and sign a waiver, the Probate court can require a bond. A Probate court usually takes this step if the estate has amassed a vast amount of unsecured debt or if the Personal Representative does not live in California

H.M. Vreeland has been helping California businesses, attorneys, and legal professionals choose the right surety bond to fit their unique needs for more than 100 years. We have our clients’ best interests at heart. To learn more, call (415) 573-3592.