What is an Administrator Bond?
An Administrator Bond, also known as an Administration Bond, guarantees that the person who is the administrator of an estate performs legally and ethically his or her court-appointed duties and protects those in the will (beneficiaries) against fraudulent acts.
This type of fiduciary bond covers any financial damages to the estate due to dishonest acts by the administrator.
Like most surety bonds, the Administrator Bond is a contractual agreement between three parties. The Principal is the court-appointed administrator that needs to obtain the bond. The Obligee is the authority that requires the bonding. The Surety is the party that underwrites the bond.
Administrator Bond vs. Executor Bond
The Administrator Bond is often written as a bond of administrator or executor and is similar to an Executor Bond. But there is a slight difference.
Executor Bond - This type of bond is required when the deceased left a Will and named a person(s) in the will to act as an executor.
Administrator Bond - This type of bond is required when the deceased died without a Will (intestate). The court will appoint one of the main heirs to serve as administrators.
What is the role of an Administrator?
The court typically appoints an administrator to manage the estates of individuals who:
- died without a will;
- had a will but not an executor;
- or when the executor has died, has resigned or declined to serve or have been discharged from the case.
The petitioning administrator is often required to submit a surety bond, inventory, and annual returns.
The documents mentioned above must be filed, and any applicable fees must be paid upon filing. Once everything in the documents are correct and complete, they are submitted to the presiding Judge for approval.
You can find all of these requirements provided to you during the hearing.
*Note: Do not omit a relative on the petition. It can result in losing your authority as administrator.
What is an administrator’s account?
An administrator of an estate is required to submit final and distributive account report within six months of appointment. This report covers itemized receipt statements, disbursements, and distributions made by the administrator during the reporting period.
An account is expected 13 months after his or her appointment as administrator when a federal estate tax return is due and once a year until a final and distributive account is filed.
An administrator's account will remain valid until the administrator files the final and distributive account with the fiduciary/probate court. Once it is approved by the court, the administrator is released from his or her administrative duties.
When do you need an Administrator Bond?
This type of bond is only used when an administrator is appointed by the court to handle an estate by a person who died without a will.
An example of an Administration Bond:
Mr. Bergen, a successful businessman who owned multiple residential and commercial properties, recently passed away without completing his Will. His kin and successors were in dispute in the disbursement of his assets. An administrator will be appointed to handle the case to properly distribute the estate assets (both real and personal property), according to The Intestate Succession Act.
Usually, Mr. Bergen's surviving spouse is legally entitled to the estate with no issue (lawful lineal descendants). With issue, Mr. Bergen's estate, where the net value does not exceed fifty thousand dollars, will go to his surviving spouse.
If Mr, Bergen died without a spouse or issue, his estate will go to his father and mother in equal shares if both are living. If either of them is dead, the estate shall go to the survivor (R.S., c. 236, s. 7).
With no spouse, issue or living parents, the estate will be split into equal shares over to his surviving brothers and sisters, if any (R.S., c. 236, s. 8).
Administrators are often trusted kin or relatives. Mr. Bergen's married sister Elsie Hammock, who also happens to be his business associate, was elected by his family and petitioned by the court to serve as an administrator. Mrs. Hammock will require an Administration Bond as a promise to perform all of her duties. If she fails to perform faithfully and not file reports or pay necessary taxes on time, a claim will be made against her bond. Her chosen Surety Company will pay the money to the court. But she will reimburse the money to the Surety that was paid out.
It is often a court's decision whether an Administration Bond is required.
There are situations where an Administrator Bond is not required:.
- A financial institution is appointed as an administrator
- There is a legal will that indicates the non-requirement of the bond
How much does the Administrator Bond cost?
The Administrator Bond amount is often twice the value of the estate. The court can assign the requirement for a bond when the beneficiaries are all consenting adults, or when the value of the estate is less than $50,000 (QBR 74.11 and SPA s. 25).
The bond premium is based on the Administrator's credit score and financial capacity.
You can learn more about the bond costs by getting a FREE quote here.
How can I get an Administrator Bond?
First, choose a reliable surety company that has experience and knowledge in issuing Administrator Bonds.
Before an administrator obtains a surety bond, he or she must submit to a screening process. A surety underwriter will review how financially stable and experienced an administrator is by performing an in-depth credit check.
The requirements for getting this type of bond may include:
- Completed bond application
- Financial documents that show strong financials (bank statements, income, other sources of revenue, irrevocable lines of credit, etc.)
- Form 74S
- Sealed Affidavit of Execution of Bond in Form 74T
- Other filed administration forms as required
To get started with the bonding process, please do not hesitate to contact us at 800-333-7800 or tweet us. Our surety bonding experts will be happy to assist you.