When Are Fiduciary Bonds Required in Probate?

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.

Why Should I Have a Will?

A will is the starting point of any good estate plan. A will is a legal document that directs how your estate is administered and allows distribution of your assets to your named beneficiaries and contingent beneficiaries after your death. A properly drafted will protects your family by helping them meet their future financial needs after your death. A will minimizes your taxes by reducing the size of your taxable estate. Having a will also avoids intestacy proceedings to determine how your estate should be distributed. Having a will also avoids your beneficiaries from posting a bond to probate your estate. It is very important to name an executor who is responsible for settling the estate, filing all the inheritance tax, estate tax and income tax returns and carrying out the provisions of the Will.

It also enables you and your spouse to set up a testamentary trust for your children if you both were to die at the same time. You would also name a trustee that would watch over the trust assets and distribute them to pay for support, education and maintenance of your children until they reach twenty five or any age you and your spouse deem appropriate. A will allows you to name a guardian to raise minor children, which avoids having the Orphans Court appoint a guardian based on the information it can gather after you and your spouse die.

You can state in your will that you may leave a memorandum suggesting the distribution of certain personal items that you want distributed after your death such as jewelry, china, coin collections, memorabilia, tools or golf clubs etc. You can avoid potential conflict by leaving a signed and dated list with your will explaining who should get these personal items.

You should consider updating your will if any of the following occur:

1. Substantial increase or decrease in your estate assets.
2. You retire or sell your residence.
3. If you get married or get divorced.
4. Any new births or deaths in your family.
5. You move to another state or country.
6. You start a business, add a partner or terminate one.
7. The federal estate tax or income tax laws change.
However, a will only covers assets in your name. It does not cover jointly owned assets or assets with named beneficiaries such as retirement or brokerage accounts. Therefore you should regularly update your beneficiary designations on those types of accounts.
The most important thing a will gives you is peace of mind knowing that your family and loved ones are taken care of.

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