What happens if am the executor and the bonding agency have to pay a claim due to my negligence?
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An executor bond protects the heirs to an estate. After a person dies, his or her property is subject to probate. This generally means that an executor must collect the decedent’s property, inventory the property, ensure proper appraisals, pay any valid debts from the assets of the estate, and then distribute the remaining property. An executor bond operates as a guarantee that the executor will perform his duties as required by law. If an executor mismanages the property, steals from the estate, or does something that impairs the value of the property, then the bond will compensate the estate accordingly.
The executor bond essentially guarantees proper performance. It is similar to an insurance policy. Each jurisdiction may use other terms for this type of bond. Some jurisdictions may use the terms estate bond, fiduciary bond or probate bond. Despite the term, the purpose of the bond is the same — to protect the estate and the heirs to the estate.
The laws of many jurisdictions allow a person making a will to waive the requirement of an executor bond. This means a person serving as an executor will not need to obtain a bond. The law usually simply requires the person making a will to include clear language in the will waiving the bond requirement. Eliminating the requirement of an executor bond expedites the probate process and minimizes the cost of administering the estate. A probate lawyer can advise a person when a waiver of a bond is appropriate.
The cost of this type of bond generally will vary, based on the estimated value of an estate. A person can obtain an executor bond from a bonding company or a surety company. These companies specialize in numerous types of bonds. A person ordinarily just needs to submit an application for the bond; the bonding company may do a credit check and then issue the bond absent any problems. The executor is entitled to reimbursement of the bond fee from the assets of the estate.
If the bonding company pays a claim under the executor bond, it can take legal action against the executor for reimbursement of any claims. The bonding company has minimal risk when issuing a bond. It simply determines whether a person has sufficient resources it can pursue, if there is a breach. If it determines that a person is not bondable, it will not issue a bond. If this occurs, a probate court may need to designate someone else to serve as an executor.
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