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ESTATE BONDS

 

As a way to protect an estate and the beneficiaries, an executor is often required to post an estate administration bond. Estate bond is also known as a Fiduciary Bond. The bond protects the beneficiaries and creditors in the event of improper administration of the estate assets.  A bond is usually required where an executor appointed in a will resides out of province, where there is no will or where an alternate executor is applying to the Court for appointment as executor.  The bond states that if the executor fails to perform the duties as agreed then he/she would be liable to pay the entire bond amount. The bond application is always concluded in the city/province/country where the duties are to be carried out. All applications are then analyzed by a judge to verify if all conditions have been satisfied.


The primary types of Estate Bonds are:

  • Administration Bond

Required when no will exists or will not be located. The bond covers dedicated execution of the obligation of the trustee named in a will – testamentary trustee or spreads enduring execution of obligation by a delegated trustee in bankruptcy matters. In short, the purpose of an Administration Bond is to protect the creditors and lawful heirs of the estate.

 

a) Administration with will annexed – Required when executor named in the will or those appointed are deceased or refuse to act as administrator(s) of the estate.

b) Administration de bonis non – Required when the named executor in the will dies, resigns or is removed before completing the estate.

c) Administration pendent lite – Bond is required when the will is being contested.

 

  • Guardianship Bond

Required by the office of the Public Guardian and Trustee or the court.

 

A guardianship bond guarantees a court that an individual assigned to serve as a guardian will perform his/her obligations as required by law. It is a certification of execution. Certain circumstances oblige courts to select a “Nominee” to deal with the funds of a person who can't deal with his or her own finances, for example, a minor youngster, an elderly individual or an incapacitated individual or when there is no living power of attorney. This bond secures the funds or resources of the individual who is the subject of the guardianship ( under Substitute and Decision Act)

  • Foreign Executor Bond

Bond is required when the executor(s) named in the Will resides outside the province or Canada.

  • The trustee in Bankruptcy Bond

The trustee in Bankruptcy Bonds is required by the court-appointed Trustee in Bankruptcy.

 

The bond guarantees the trustees’ compliance with the Bankruptcy Act. It also ensures that the debt/creditors of the estate will be treated in an equal and fair manner as prescribed by the laws governing bankruptcy.

 

  • Executor Bond

Executor Bonds are mandated by the court in order to provide assurance that the executor of an estate correctly allocates the assets for an incapacitated or deceased person with whom they have been assigned fiduciary duty.

 

In other words, Executor Bonds are directed by the court in order to guarantee the honest accounting and faithful performance of duties by a fiduciary or trustee. Executor Bonds provide assurance that the executor of an estate appropriately handles, and distributes, the assets of the disabled or deceased person whom they are duty-bound to act on behalf of.

 

Others include:

  • Waiver of Probate

Required typically by financial institutions or private companies in lieu of probating estate. Mostly these bonds are required to transfer assets like stocks, investment funds on the name of the beneficiary of the estate without the need to acquire probate letter. The waiver of probate bond is inexpensive and less time consuming as compared to probate bonds

  • Missing Beneficiary Bond

When there is no Will and known beneficiaries of an estate, the Public Trustee is designated as Guardian as well as Trustee by the court in Ontario. This bond is required by the Public Guardian’s office when they find “Known” heir/beneficiary of the estate.

 

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