Before we dive into the main topic of estate bonds, there are three important terms whose definitions you will need to know first:

  • Will documents: A will document refers to a legal instrument that provides instructions on how its creator (i.e., the testator) wishes to distribute their estate after they have died.
  • Executor of the estate: The person who is appointed to oversee the estate distribution process, handle issues associated with the will document, and manage all other matters related to the testator’s estate. 
  • Surety Bonds: A surety bond can be defined as a written contract between three parties that either guarantees payment, performance of a specific act, or general compliance. As you will soon learn, there are many different kinds of surety bonds.

In general, an estate bond is a type of surety bond that ensures that the executor of an estate will fulfill their legal obligations, such as distributing the estate property, in accordance with the relevant laws. 

Basically, how it works is that the executor will need to purchase an estate bond from a surety bond company. To do this, they must submit an application and agree to a background check. Once approved, the surety bond company will issue them the estate bond. 

The amount of the estate bond will be based on a certain percentage of the total value of the estate. In other words, the executor will only need to pay a small portion to purchase a bond, not the full sum of the property. The estate bond that is purchased will serve a similar purpose as an insurance policy. Though it is important to point out that the two are not the same. 

For instance, if an executor deliberately fails to perform their legal duties or they violate a law that is associated with their legal duties, then they will be forced to forfeit the estate bond and use it to compensate the beneficiaries for any losses they caused as a result of their actions. 

Thus, in some ways, an estate bond can act as both an incentive to motivate the executor to properly perform their duties, as well as a form of monetary protection for the beneficiaries in the event that an executor is negligent, fails to deliver, or commits some other estate-related violation.

It should be noted, however, that not every state will require an executor to purchase an estate bond. In the states that do require the executor to purchase an estate bond, the executor may also need to sign an Indemnity Agreement, which guarantees that the executor will pay for any financial losses that they caused. 

Additionally, some courts and/or will documents may demand that an executor purchase an estate bond, regardless of whether it is a state law requirement. 

If an executor is able to complete their legal obligations without issue, then a court may cancel or discharge the executor from the estate bond. So long as the executor does everything that is required of them in a legal manner, then they will be able to get the money back that they paid for the estate bond. 

Finally, the laws regarding estate bonds and executor duties can vary widely from state to state. Therefore, depending on your jurisdiction, estate bonds may also be referred to as one or more of the following types of bonds:

Keep in mind that just because two states use the same name to describe an estate bond, does not mean that the bond requirements will be the same or even similar. As such, you must always remember to review your state and local laws, and any estate-related documents like a will.

Is an Estate Bond Always Required?

As previously mentioned, not every state will require the executor of an estate to purchase an estate bond. However, the executor will need to purchase an estate bond if it is required by a state or local probate law, ordered by the probate court, and/or the will document specifically requests that the executor obtain one. 

Generally speaking, courts and will documents will usually only ask an executor to purchase an estate bond when there is a lot of money at stake or if it is a larger estate. In other words, the more the beneficiaries have to lose, the better the chances are that the executor will need to obtain an estate bond. This is especially true in states where there are no estate bond laws in place to protect the beneficiaries against financial losses. 

Some other situations in which an executor may be asked to secure an estate bond include when the testator dies without a valid will (e.g., they died intestate) and if the executor is considered an out-of-state fiduciary. 

On the other hand, there are some rare exceptions wherein a property owner may include a provision that says they do not want the executor to purchase an estate bond. This can happen when the property owner knows that the estate bond will be costly or may potentially delay the process of distributing the assets of an estate.

Some other instances in which posting an estate bond may not be necessary include if the bond requirement is waived, the fiduciary party is a financial institution, and/or the probate court ultimately determines that there is no real need for one. 

What if an Estate Bond Isn’t Posted?

Depending on the circumstances and the probate laws of a particular state, if an estate bond is required and it does not get posted, then it can delay the entire probate process. The same will hold true if an estate bond is posted, but it is posted improperly. A delay in the probate process can lead to many legal ramifications, such as will contests, statute of limitation issues, and disputes over late property distributions. 

In the event that an executor fails to obtain an estate bond within a reasonable amount of time or is not able to get one because of their financial circumstances (e.g., they recently filed for bankruptcy), then the court may proceed with the process by appointing a new executor who is capable of securing and posting the requisite estate bond.

Do I Need a Lawyer for Help With an Estate Bond?

As is evident from the above discussion, estate bonds can present complex legal matters that involve intricate legal requirements and various probate laws. Also, one minor slip-up in obtaining or posting an estate bond could potentially disrupt the entire probate process as well as result in the original executor being replaced. 

In addition, executors who fail to perform their legal duties or violate a relevant law could lose the money that they used to purchase it if they are forced to forfeit the estate bond. Given the sheer number of things that could go wrong when dealing with estate bond issues, it is generally recommended that a party hire a local estate planning lawyer for some further assistance.

An experienced estate planning lawyer can make sure that you understand and are following the proper estate bond requirements in accordance with the law. Your lawyer can also determine if you are in danger of violating a legal obligation and can provide advice on ways to fix the issue before it gets worse.

Alternatively, if you are the testator and would like your will to contain a provision that either waives or requires the executor to purchase an estate bond, your lawyer will be able to help you make those changes to your will document as well. 

Finally, if there is an issue with the will, the probate process, and/or the executor of the estate that ends up becoming a lawsuit, your lawyer will be able to assist you in building a case. Your lawyer will also be able to provide representation in court and at the very least accompany you if you need to appear at a probate hearing.