What Are Probate Bonds?

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For many, the concept of estate planning and the probate process can seem daunting. If involved in a loved one’s estate, one term you might often hear but not be familiar with is “bond.” These financial instruments play a pivotal role in ensuring the fairness, accountability, and proper management of estates during the probate process. Below, we will share a little more detail and answer a few fundamental questions: what is a bond; when is a bond needed during probate; why they are used; and how do bonds work?  

Also referred to as a “fiduciary bond” or “administrator bond,” a probate bond’s purpose is to act as insurance policy for an estate. Essentially, it’s a financial promise that helps keep things fair when someone passes away and their assets need to be distributed. This promise is made to ensure the person in charge of handling the estate, often called the executor or administrator, is acting in good faith.  

What Does It Mean to “Be Bonded”? 

In Tennessee, the phrase “to be bonded” is generally used to describe hiring an insurance company and paying a premium in order to secure the insurance over the assets of the estate. In other states, such as Kentucky, being bonded means that you are financially responsible for the assets of the estate, but do not necessarily have to secure insurance on the funds. If such a court requires an insurance company to be hired, then surety must be paid and posted with the court. 

How Do Probate Bonds Work? 

When someone passes away, the court will often require the estate’s administrator to secure a probate bond. This is especially important if the decedent passed away intestate (without a will). This bond is a way to protect those who are expected to receive assets. If the estate’s administrator fails to fulfill their responsibilities, the bond is in place to protect the estate’s monetary value.  

Here’s an example of what the process looks like: 

Bob dies and leaves a $500,000 estate. Christy would need to be bonded in Tennessee to serve as the administrator of his estate. Christy would fill out an application with the insurance company. The insurance company would process the application, do a credit check, and then decide on a premium. Christy would then need to pay the premium to the insurance company. Once the premium is paid, the insurance company will issue a bond certificate, which would need to be filed with the court to show that Christy has in fact been bonded. Without this bond, the court would likely appoint someone else as the administrator of the estate.  

When Are Probate Bonds Required? 

In Tennessee, if an individual dies without a will, the law requires this having the personal representative being bonded is interest of all parties. The size of an estate plays a role in determining the bond amount set by the courts. This amount goes up with the size of the estate to ensure that there’s enough money to resolve any unforeseen problems in the future. Essentially, a large estate needs a bigger safety net compared to a small estate.  

Do Executors Need to Be Bonded? 

Executors are not often required to be bonded. The reason is that most wills waive bond, meaning that the deceased person is telling the court that there is no need to insure the executor. However, if a beneficiary of an estate requests bonds, many times the court will order one to be put in place even though the will waives bond. 

Wrapping It Up 

Overall, the purpose of a probate bond is to protect the decedent’s estate. It serves as a safety net for family and friends in an already stressful and grievous time. Probate bonds are used for estates of all sizes and those who passed with or without a will. They are often vital instruments to protect beneficiaries and creditors, maintain accountability, and mitigate risk. While probate bonds are not required in every situation, they are extremely common and play a pivotal role in closing an estate as efficiently as possible. 

If you have questions on bonds or any part of the probate process, our team of experienced attorneys are here to help. Call Crow Estate Planning and Probate at 615-558-8002 to schedule your free consultation

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