Fiduciary bonds or administrator’s bonds, act like an insurance policy covering the administrator’s performance of his or her duties. The purpose is to ensure that the administrator does not steal the beneficiary’s assets, which is what the bond insures against.
Fiduciary bonds are not required if the decedent left a valid Last Will and Testament that specifically waives the requirement for a bond. This alone is a compelling reason why everyone should have a Will, even if their intended beneficiaries are the same people who would inherit under the intestacy laws.
Fiduciary bonds are required if the decedent’s Last Will and Testament did not waive bond, or if the decedent died intestate (without a will). It may take one to three weeks for fiduciary bond to be issued and the estate cannot be probated until the bond is issued.
The amount of the bond depends on the size of your estate. Pennsylvania requires the bond to be double the value of the personal assets. Real estate is not typically included in the bonded amount. Because real estate is inherently fixed, there’s no concern that the personal representative will steal it. The amount of the fiduciary bond can fluctuate over time. If more assets are discovered, the amount could increase. If a distribution is made from the estate, the amount could decrease. You should monitor the amount of the bond to be sure that it accurately reflects the value of the estate.
Fiduciary bonds are usually renewed on an annual basis. The longer the estate remains open, the more money is paid out in bond premiums by the estate. This creates an incentive for the personal representative to keep things moving and complete the process as quickly as possible. A pro rata refund of the bond premium may be available if the estate is closed before the one year anniversary of the bond issue date.
If you have any questions about surety bonds or probating an estate please call Gregory J. Spadea at 610-521-0604. Spadea & Associates, LLC located in Ridley Park, Pennsylvania provides estate and tax planning services and probates estates.