Attorney meeting client

What Is a Probate Bond? Do I Need One?

A probate bond is a bond issued against the performance of the executor or administrator — a bit like an insurance policy that protects beneficiaries and creditors in the event the executor is negligent or engages in fraud with the estate’s assets.  

Imagine for a moment that you discover you’re one of the beneficiaries of the estate of your long-suffering Great Aunt Florence. She lived in the same tiny house and drove the same simple car, so you had no idea she’d been slowly building a massive nest egg. Since her final years were filled with illness, she also amassed some serious medical bills. 

 Within months of learning that you’re to inherit a hefty sum, you find out that the neighbor she named as executor took all the money in the estate and ran off to Barbados. You’ve heard they’ve already blown through all the cash, so you’re not sure whether you’ll ever get your inheritance. Plus, hospital invoices are piling up on Aunt Florence’s kitchen counter. 

 Are you out of luck? 

 Not if the court required a probate bond. 

 

What is a probate bond?

A probate bond (sometimes called a fiduciary bond) is a type of court bond that may be required before an individual or entity can be named as the personal representative of an estate. The bond’s purpose is to ensure that the executor or administrator of the estate will perform their duties honestly and in good faith. 

If you’re wondering what exactly an executor’s duties are or how the probate process works, here’s a mini primer: 

Probate is the process through which an individual (sometimes named in a will) seeks authority from a probate court to act as the official representative of the estate of a deceased person.  

While each probate process is specific to the particular estate, they generally follow the same procedure: 

  1. Someone petitions the court to become the legal representative of the estate. 
  2. Once the court grants that request, the executor (or administrator, if there was no will) notifies heirs and debtors
  3. The executor identifies all assets and transfers legal ownership from the deceased to their estate
  4. The executor pays funeral expenses, taxes, and debts from the estate’s funds
  5. The executor transfers assets to the heirs
  6. The executor notifies the court that they have carried out their responsibilities and request that the court close the estate. 

Throughout the process, the executor has access to and control over estate assets. They have a fiduciary duty to manage those assets honestly and in good faith, and a probate bond is sometimes used to ensure that they honor that duty.

 See: What Is The Probate Process?

 

How do probate bonds work?

A probate bond is similar to an insurance policy (with one major difference that we’ll discuss more below).

A personal representative of an estate (either an executor or an administrator) purchases a probate bond from a surety company. They pay a portion of the value of the estate — usually around 0.5%. As the bond is required before the individual is appointed by the court, they will have to purchase the bond out of their own funds.  However, a probate bond is a legitimate estate expense, so the personal representative can use estate funds to reimburse themselves once the estate is opened.

See: Can I Be Reimbursed By the Estate for Funeral (And Other) Expenses?

If someone makes a claim against the bond, the surety company investigates to determine whether the claim is valid. If they find that the claim is valid, the surety company notifies the estate’s representative of their requirement to resolve the claim. If the representative does not resolve the claim, the surety company will do so. 

However — and here’s where a probate bond differs from insurance — a probate bond isn’t a Get Out of Jail Free card. Its purpose is to protect the estate and its heirs and creditors, not the person who purchased the bond. If the surety company has to step in to resolve the claim, they will require reimbursement in full (plus legal expenses) from the bond holder. 

 

I’m the executor or administrator. Do I need a probate bond?

The probate court decides whether a probate bond is required, and it will generally require a bond unless:

  • A valid will specifically waives the bond requirement, or
  • In the event there is no will, all heirs are adults and have specifically signed a waiver of bond

Presumably, when a testator (the person who drafts a will) includes a bond waiver provision, they’re doing so because they trust the person they’ve chosen as executor of their estate to act honestly and in good faith. Similarly, if all heirs agree that the intended administrator does not require a bond, the court assumes they have reason to trust that individual. 

However, even if the will includes a waiver, the court has the discretion to mandate that an executor get a probate bond before taking responsibility for the estate. Probate courts are more likely to take such an action if the estate has a large amount of unsecured debt. By doing so, they are protecting potential creditors of the estate. 

 

What if there is no probate bond?

Let’s go back to Great Aunt Florence. What happens if the executor blew all the money in the estate, and they didn’t get a probate bond? 

The unfortunate truth is that you might not get your money. You could (and probably should) make a claim against the executor in civil court, but if they have no money to pay, you may not be able to recover your full inheritance. 

Of course, the good news is that most executors and administrators take their fiduciary duties very seriously. They don’t abscond with the estate’s funds or willfully mismanage money. 

But if it does happen, courts want heirs and creditors to be protected, which is why they require probate bonds. 

See: What An Executor Cannot Do


We help people navigate the probate process without an attorney every day. Contact us to see if we can help you.