What is a Trustee Bond?

A Trustee Bond guarantees the actions of a trustee in handling any remaining assets of an estate. It is also a type of court surety bond that is typically required by a court for individuals appointed as trustees regarding the estate of a minor or someone deceased or disabled.

Trustee bonds give security that the designated individual performs their duties in a lawful and ethical manner without fraud, misrepresentation or deception.

For whatever legal reasons in appointing a trustee, a Trustee Bond ensures that the trustee adheres to the instructions and expectations of the court and acts according to the rules of law. A Trustee Surety Bond protects the beneficiaries of the trust from mismanagement of funds or misappropriation of the trust.

To understand more about this type of bond, let us first know what are the duties of a trustee.

 

What is a "Trustee"?

A trustee is an individual or a financial institution that is awarded fiduciary powers by the courts, meaning that they have the ability to administer property or assets for someone who is a minor, disabled or deceased.

A trustee may be petitioned for a broad range of purposes, such as in the case of trust funds, educational trusts, bankruptcy, charity, marital trusts, living trusts, testamentary trusts or for other types of retirement plans and benefits.

Anyone can serve as a trustee. In addition to family and friends, professional trust companies administer a trust when someone no longer has the ability to do so. Many banks provide trust departments that render trustee services. Attorneys and accountants often serve as trustees of their clients' trusts.

Selection of trustee is extremely important. Failing to select the right person or trust company can financially compromise every aspect of an otherwise competent estate plan.

 

What does the Trustee Bond guarantee?

A Trustee Bond guarantees that you are a reliable and trustworthy individual or company that can follow and acts according to instructions and expectations of the courts regarding the handling and eventual transferring of an estate and other assets to a beneficiary. It makes you a credible trust entity that can perform a wide variety of safekeeping services related to asset management and investment.

Trustees, whether individuals or companies, save their clients time and effort in reducing the need to coordinate financial assets and information between attorneys, brokers, financial planners, and tax advisors. A Trust Bond guarantees that trustees take full fiduciary responsibility for their clients' financial well-being and always considers their clients' best interests in each transaction and service performed.

 

How do you know if you need a Trustee Bond?

State laws determine when a Trustee Bond is required. Trustee Bonds are similar to Custodian Bonds, Executor Bonds, and Guardianship Bonds, where all legal appointees or personal representatives are petitioned to carefully manage assets, properties, and other financial resources for beneficiaries.

Sometimes, Trustee Bonds may be requested by beneficiaries or creditors who are concerned about the lack of commitment or poor financial status of a trustee representative.The beneficiary or creditor may ask the courts to impose a surety bond instead of having the trustees removed from their duties to ensure that the assets of the trust, individual or estate will be financially protected.

Therefore, if there is something in a trustee's background that raises questions regarding the capacity to handle assets, a court may require them to post a Trustee Bond.

 

What is the cost of a Trustee Bond?

Typically, the cost of the bond is often based on financial capacity and personal credit. In getting a reliable surety bond company, their surety underwriters will make inquiries on your credit to evaluate if you have the financial capability to act as a trustee and perform your court obligations all the way through.

However, state and local laws determine the bond amount. The bond amount is sometimes equal to the estimated amount of assets that you are going to manage, maybe higher. Bond premiums are based on the bond amount percentage.

The surety bond company will require a copy of the petition or order from the court that indicates the bond requirements and amount. As a trustee, you will also be required to furnish a copy of the trust.

 

How do I get a Trustee Bond?

Trustee surety bonds make affordable protection for the trust or probate beneficiaries. Here, we guide you through four simple steps:

First, complete and submit your application to a reputable surety bond provider. Or get a free quote.

Along with your application, make sure to include these other requirements to be qualified:

  • Financial statements (as proof of financial capacity)
  • Copy of your mandate or petition from the court

The surety company will review the documents that you have submitted. If they find you eligible, the surety will call or email you with a quote. You will be then asked to sign an indemnity agreement.

Once you have signed the agreement, the surety will immediately issue the bond and send it to you!

For more information on trustee bonds and understanding bonds rights and responsibilities, call a surety expert today!

Check out this Infographic!

Have a better view of Trustee Bonds through this infographic.

Trustee Bond Infographic
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