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Ai Insurance Organization

What is an Estate Bond?

Dustin SanVido discusses the importance of E-Bonding with clients in an office

Estate bonds, also known as probate bonds, executor bonds, fiduciary bonds, and administrator bonds, are a type of court bond required to protect the interests of an estate and its beneficiaries in accordance with applicable laws. 

When a person dies, they need to appoint someone to manage the deceased’s affairs until debts and taxes have been paid. Only then are the property and assets of the estate disbursed. Estate bonds guarantee the faithful and honest accounts given by fiduciaries or executors on behalf of an estate. The beneficiaries are ensured that everything is accounted for, without any chance of overlooking something in their favour. The bonds are defensive language that can protect against the evasive actions of an executor or fiduciary. This defense offers protection if the latter persons would make monetary withdrawals from property instead of saving it for someone’s future interest

An estate or probate bond, however, is not insurance. The bonded party would be responsible to the surety for payments it makes on your behalf due to your failure to fulfill your duties toward the estate. An Indemnity Agreement signed when purchasing the bond functions as your promise to repay the surety for the losses you cause the surety to pay on your behalf. Often an appointment as administrator or executor will not be finalized until the estate or probate surety bond is purchased.

When is an estate bond required?

An estate bond is required when an individual dies or becomes incapacitated and has not established a will. The probate court must establish which family members are heirs and the court requires that each heir post an estate bond before it can distribute assets to them. An estate bond is a type of financial instrument that guarantees the executor will fulfill all of the obligations they are owed, such as paying estate taxes. It can also protect the heirs if something goes wrong during the probate process. For example, if an executor fails to timely pay property taxes on behalf of someone else’s property, then that person may be liable for paying them along with any penalties.

An estate bond is required when the value of the estate exceeds the provincial exemption. This means that if an individual’s estate comprises more than that allowable amount, then he or she must acquire an estate bond.

There are many reasons why you may need to obtain an estate bond. Property such as jewelry, fur coats, and artwork may be subject to creditors who could claim ownership of these items in the event of the owner’s death. An estate bond protects these types of assets so they do not become subject to other people’s claims.

If you are a trustee of an estate, it is imperative that you purchase an estate bond to protect the beneficiaries of the estate. Estate bonds are also purchased in case one or more of the beneficiaries sue you in civil court. If one of the beneficiaries files suit against you, they will be required to post a performance bond to ensure payment.

What is the purpose of an estate bond?

The purpose of an estate bond is to provide a final safety net for the people you care about. When you die, your estate can be tied up in court battles if you don’t have an estate bond in place. Protecting your family with an estate bond gives them peace of mind and time to grieve rather than worry about how they will continue to live when their loved one dies.

An estate bond is a specialized type of insurance policy that covers the beneficiaries who are closest to the deceased. The other beneficiaries, such as children or grandchildren, may not be covered by the estate bond. This type of bond is meant to protect the beneficiaries in case there is any unexpected expense, what would come out of their own pockets for something like funeral costs.

How much does an estate bond cost?

Estate bonds are sold by Surety companies via their broker partners. 

An estate bond’s cost is determined by the amount of coverage it provides, based on a rate (multiplied by the estate value) and term provided by a particular surety, typically in the range of 0.5% – 1%.  The higher the bond amount, the higher the cost. 

For example, if you have a $500,000.00 estate bond requirement, and the rate proposed is 1% the bond will cost $5000.00. 

This is a typically a one-time fee and it’s paid upon issuance of the bond.

With Ai Insurance we will always request that a bond company pursues an option for a one-time fee instead of annual fees. Guardianship bonds however, are the only estate bond instrument where an annual fee is charged based on an annual rate. The bond will be billed each year it is required, usually up front and renewed at the discretion of the surety outlined in it’s terms of support. 

Who pays for an estate bond?

The costs of obtaining estate bonds are the responsibility of the estate and are typically paid for by Trustee/Executor/Administrator before letter of probate are granted, then refunded by the estate along with all other incurred costs. 

In any event where a second year term for an estate bond is purchased, in addition to any years after, a pro-rata refund will be provided to the estate. The conditions of the closure and refund will be forwarded with all proposed terms of support.

For Estate Bonds, Contact Dustin SanVido

When the need for a estate bond is required by the courts, Dustin SanVido will be there to assist and facilitate the product, while answering all questions and simplifying the process for both Law offices and Executors/Administrators alike.

As a true specialized estate professional at Ai Insurance Organization, Dustin SanVido works with clients across Canada and internationally to facilitate fiduciary bonding needs for individuals and law professionals in the private sector.

Utilizing a network of close market partnerships, his Dept. is often able to find clients the best and most affordable bonding even for businesses and clients that think outside the traditional surety box.

Dustin’s expertise lies in navigating the surety world of estate instruments for both his Lawyer affiliates and Executor/Administrator/Guardianship clients. His knowledge of surety bond products in the Estate (Fiduciary) class are second to none – Dustin should be the first person contacted when the need for an estate bond arises.

Dustin SanVido holds a Registered Insurance Broker of Ontario (RIBO), Canadian Accredited Insurance Broker (CAIB) license and designation, respectively, and his Associateship in Canadian Surety Bonding (ACSB) professional designation through the Surety Association of Canada (SAC).

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