Does Your Will Waive Bond for the Executor?
The following is a guest post by Chris Birk of SuretyBonds.com, which also publishes the Surety Bond Insider:
If your list of New Year’s resolutions seems thin, look no further than your estate plan — and make sure you’ve included a waiver of bond for the executor.
Probate bonds can prove a costly headache. Without a will that explicitly waives the need for a probate bond, courts have no choice but to mandate their purchase unless the heirs formally agree that a bond is unnecessary. And even then the court may still deem a probate bond necessary to ensure the estate and its assets are protected and debts are paid.
The absence of a bond waiver ensures that the executor is likely to spend time and money negotiating a financial and legal hurdle in a process that already has its fair share.
Surety companies will also examine the financial and credit history of the executor before issuing a bond. Make no mistake — there’s an underwriting process for these bonds, just like any other risk-management mechanism. There are cases where an executor has failed to qualify for a bond, triggering a new series of legal maneuvers involving the surety company.
The cost of a probate bond depends on the value of the estate and its unsecured debts. For estates valued at more than $1 million, bond premiums could easily run about $2,000 per year depending upon the location.
While the estate can pay for bond costs, think of it more as a reimbursement — you can’t access the estate funds until probate is complete. And sureties won’t issue bonds with an I.O.U. In addition to upfront costs, executors (and administrators) are on the hook for renewals and premiums each year.
These costs and potential aggravations can slow the probate process. They’re also a recipe for confusion and, in many instances, unnecessary expense.
With the new year underway, now is a great time to revisit your estate plan and thoughtfully consider including a bond waiver.
This is a very useful post. Too often practical questions like this are not asked. I have seen what happens when no one can qualify for a bond, its not pleasant and an outside professional gets to probate the estate.
I have a good post on whether or not to videotape the execution of a will and/or living trust.
Excellent comment. Love your posts on WeatlthCounsel, as well.
I would like to comment. My grandmother's will waived bond on the executer of the estate. The executer then stole all of the money from the estate. Nearly $86,000. Isn't that what the bond is for? Protection? After that experience I suggest a bond.
RESPONSE: Yes, a bond provides protection against the possibility that the executor might steal or otherwise dissipate the assets of an estate. Unfortunately there are times where a bond does make sense for that reason.
My sister passed away, leaving nothing except perhaps debts. I have family in NC who would like me to sign a waiver of bond. My only concern is that this particular family member is very creative, financially, and has been known to enter into creative and futile endeavors which left him worse off financially. I don't want to get dragged into some sort of scheme, and have mine and my spouse's credit ruined by a sudden onslaught of legal debt.
Can this happen if I sign the waiver of bond form?
RESPONSE: The purpose of the bond is to make the estate beneficiary whole if the personal representative of the estate steals or otherwise disposes of the assets. If you have concerns about this, I would not sign the bond.
Thank you for your response. To clarify, I'm not so concerned about the potential administrator stealing any estate proceeds because there is nothing to steal. I am concerned about well-intentioned schemes turning costly and costing heirs money. So if I sign the bond, do I open the door for future liabilities?
RESPONSE: Generally beneficiaries of an estate are not liable for executors' misdeeds. For a definitive answer to your question, I urge you to consult with an attorney.