What is a Probate Bond?
A probate bond is designed to protect the estate in California in case the personal representative mismanages the estate, steals any of the estate’s assets, or if there is no will. Its purpose is to protect the estate heirs and creditors.
Sometimes called a fiduciary bond, it is something that may be required before an individual can be named as a personal representative of an estate.
How Do Probate Bonds Work?
Probate bonds work similarly to an insurance policy for your estate. When a personal representative of the estate purchases a probate bond from a surety company, they pay a portion of the estate (typically 0.5%). If someone makes a claim against the bond, an investigation is done to determine if the claim is valid. If it is, the representative of the estate will be contacted to resolve it. If they do not resolve it, the surety company will. If the surety company resolves the claim, they will need to be reimbursed (in addition to legal expenses) from the individual who is holding the bond.
Avoid Buying a Bond With a Will
A will that waives the bond requirement is often effective at avoiding having to obtain a bond. Another way to avoid buying a bond is for all the heirs to agree to waive the bond. However, the court may still require that the personal representative be bonded if that person resides outside California even when all of the heirs agree to waive it.
Protect the Value of Your Estate With a Probate Bond
This means that to probate an estate without a will or trust waiving the bond requirement, the personal representative will have to apply for a probate bond to be sure the value of the estate is protected. For example, if the estate is worth a million dollars – which could include a personal residence in California along with cash assets – bond premiums could run approximately $2,000 for every year the estate is opened. The first year’s premium is not refundable if the estate closes within a year.
How to Qualify for a Probate Bond
The executor or personal representative for the estate must qualify for a bond. Qualification depends on the executor’s personal net worth and creditworthiness. Some personal representatives won’t qualify and the bond company will require that their attorney maintain control over the estate account in some agreeable fashion with the bond company.