What is a VA Custodian Bond?
A VA (Veterans Affairs) Custodian Bond is required by the courts to safeguard the financial assets, including real estate, of the beneficiary against mismanagement of funds or abuse by the legal custodian. It is similar to a Custodian Bond, in a sense, that courts appoint a legal custodian to perform the obligation, only this focuses on Veterans.
The purpose of the VA Custodian Bond is to ensure that the funds and critical assets are used for the well-being of the beneficiaries (the Veteran) and their dependents. This type of fiduciary court bond aims to protect Veterans and their beneficiaries who are unable to handle their financial affairs.
Who needs a VA Custodian Bond?
Any Veteran who is regarded as an incompetent adult beneficiary by the Department of Veterans Affairs (VA) or under legal disability because of court action resulting in an inability to conduct his or her financial affairs. The court here is the Obligee that requires the surety bond to protect Veterans and their children from any wrongful acts done by the custodian. The Veterans' children (who are minors) are also presented to be permanently incapable of self-support and in need of continuing supervision under a fiduciary activity.
The custodian is the Principal who needs to post a surety bond, where the Surety will financially back him or her up in case he or she fails to fulfill his or her obligations.
What is the role of a Veteran Affairs (VA) Custodian?
A VA Custodian is a federal fiduciary who is a person or a legal entity appointed by a state or federal court to oversee veteran beneficiaries because of incapacity to manage their financial or real estate affairs. The legal title of a court-appointed fiduciary may differ from each jurisdiction, but they are also known as a guardian, executor or trustee. Other types of fiduciaries include custodian-in-fact, temporary custodian, institutional award payee, spouse payee or Indian reservation officer. The proper title should be used as required by the courts and state laws.
As a VA Custodian, you must learn and understand the needs of the beneficiary. This way, you can make decisions on how to utilize a beneficiary’s funds and make transactions for his or her physical and financial welfare. Those decisions are often based on a beneficiary’s needs, values, and unique circumstances. Veteran beneficiaries are entitled to an equal standard of living as any other beneficiary with comparable financial resources.
What are the responsibilities of a VA Custodian?
As a VA Custodian, you are responsible for submitting annual accounting and transaction reports, and any necessary changes in the beneficiary’s circumstances to the courts and VA.
These duties include, but not limited to:
- Real estate transactions (sale, purchase, renovations)
- Medical conditions and other healthcare needs
- Other investments and source of funds
- Payment of bills (income taxes, unpaid debts, etc.)
- Felony convictions/incarceration
- Changes that demonstrate proof the beneficiary no longer requires a legal custodian
As part of your duties and responsibilities, it is important to communicate with the beneficiary and keep current contact information. Make sure to notify the courts, the VA, and your Surety of any changes, and faithfully comply with regulations.
Also, the law requires legal custodians to handle and put beneficiary funds in an acceptable and secure investment that serve as additional protection from any losses and creditors.
What are the requirements to be a VA Custodian?
To be a VA Custodian, the state or federal court typically requires the following:
- VA Custodian Bond (a certified copy of the bond signed by the authorized Surety and the legal custodian).
- Face-to-face interviews with the VA
- Credit check (financial capacity)
- Background check (especially if you are currently serving as VA Custodian for other individuals)
- History of cooperation with fiduciary activities (timely accounting reports, timely notices of changes affecting a beneficiary’s entitlement, and so on).
How much is the cost of a VA Custodian Bond?
A VA Custodian Bond is required if the beneficiary’s estate is greater than $20,000.
Usually, the bond amount must be sufficient to cover assets, such as the size of the estate of the beneficiary, the special needs surrounding the beneficiary, plus the estimated annual income from the VA benefits. The Surety will determine the amount of the bond as well as any fees that may apply.
How long does a VA Custodian Bond remain valid?
The appointment of a VA Custodian may not exceed a year.
But there are exceptional circumstances when a permanent legal custodian cannot be appointed within one year so that a custodian-in-fact may be re-assigned for a temporary period.
How do I obtain a VA Custodian Bond?
Initially, you need to search for a reputable Surety Bond provider that offers available VA Custodian Bonds in your area. The company will also be able to provide you a free quote.
The Surety will provide you an application form, where you need to fill out relevant information and other details.
The company’s surety underwriter will request for your financial statements and perform a credit check. Along with your application and financial documents, make sure to include a copy of your mandate or petition from the court that requires you to post the bond (the bond form).
A VA Custodian Bond usually includes the following information:
- Bond amount
- Names of the Custodian and Beneficiary
- Name of the Surety Bond Company
- Guarantee from the Surety that they will pay the bond
- Bond validity
Take note: Getting court surety bonds does not apply to these fiduciaries:
- Fiduciaries that are:
Also appointed by the court
Trust Company or Bank awarded with Trust Powers appointed under state laws
To learn more about VA Custodian Bonds and to understand legal custodian responsibilities for veterans, call a surety expert today!