Estate Bonds

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What is an Estate Surety Bond?

Surety Bonds are commonly used during an executor’s estate administration or in the management of someone’s property by a legal guardian.

In the case of estate administration, a surety bond has the purpose of protecting the beneficiaries and creditors of the estate against improper distribution of assets by the executor. The bond guarantees that the executor will distribute the estate’s assets according to the Will or court judgement. These bonds can be required by the court for various reasons and if so determined, the executor will not be issued a probate certificate until it provides a bond.

Guardianship bonds protect minors or incapacitated people against the mismanagement of their property by a legal guardian. In order to become a legal guardian, one must make an application to a governing body such as the Public Guardian and Trustee or The Office of the Children’s Lawyer. A management plan is to be submitted and approved, and in some cases, these management plans are only approved subject to receiving a guardianship bond.

Surety bonds are issued by insurance companies and a simple application process is needed to qualify. One can view it as an extra layer of protection deemed prudent by the court system.

Types of Estate Administration Bonds

Guardianship Bond

A type of surety bond required by the courts from a person that has been nominated to take care of the financial matters of a person that has been deemed legally incapable of managing their own affairs. The bond guarantees the appointed guardian will responsibly manage the affairs of the 3rd party.
Administration Bond

When a deceased passes without a will, a court may require a surety bond be posted the estate executor. The bond provides assurance that the estate will be handled ethically and legally, and assets will be distributed according to the wishes of the deceased.
Foreign Executor Bond

A type of surety bond required by the courts when an executor appointed in a will resides out of the province or country overseeing the estate. The bond provides a guarantee for the beneficiaries against mismanagement of an estate by the executor.

Who needs the product?

As the executor of an estate, you may be required by the court to provide a surety bond for your role as estate administrator. Examples of these situations include: No Will exists, the estate trustee does not live in Canada, there’s an ongoing business in the estate, or some of the beneficiaries are minors. The court has deemed it necessary because for the above reasons, they feel the beneficiaries are vulnerable, or there exists complexities that are significant enough to require this protection.

As a legal guardian of property, you too may be required to provide a surety bond for your role as guardian. Reasons for needing a bond vary based on guardianship relationships but it’s a decision made by the Public Guardian and Trustee.

It is important to work with an experienced broker who can guide you through the application process and help you make a good first impression to the bond company. The broker’s experience and relationship with bond companies is very important because they will present your case, advocate for approval and negotiate on your behalf. An inexperienced broker may incorrectly categorize your risk and lead to approvals with high rates or no approvals at all.

FAQ

What is the cost of an Estate Administration Bond?

The cost of Estate administration bonds and guardianship bonds are slightly differently.

The cost of an estate administration bond is based on a rate multiplied by the value of the bond. This rate varies based on the strength of the application, the size of the bond and complexity of the situation, but the rate typically ranges from 0.3% to 1%. That means if you have a $1,000,000 estate and the rate is 0.75% the bond will cost $7500. This is a one-time fee and it’s paid upon issuance of the bond.

Guardianship bonds however are billed by most bond companies as an annual fee based on an annual rate. The bond will be billed each year it is required. As with estate administration bonds, the rate varies based on the situation, the size of the bond and the strength of the application. Compared to estate administration bonds, this rate is much lower and ranges from 0.25% to 0.5% per year. At FCA we always request a bond company quotes an option for a one-time fee in addition to annual fees. This one-time fee is typically in the 1.5% to 2.5% range but on guardianships that can last a decade or longer there are considerable savings to be had.

What is the process to secure the bond?

In order to secure an administration or guardianship bond, a bond application process to an insurance company must take place. As a first step in the process to making an application, you must select a broker who will approach insurance companies on your behalf. Your broker will discuss with you the administration or guardianship circumstances requiring the bond and go through a list of documents you will need to provide. These documents include:

a bond application
a personal net worth statement
a copy of the Will or Management plan depending on your situation

Your broker will then approach bond companies, present them with this information and secure terms for the bond. After reviewing with you and your lawyer, you will be in a position to accept terms and have the bond issued.

Because it isn’t feasible for insurance companies to personally get to know the executor, bond companies look at several different areas to help get a sense of the risk. First, they will look at the situation surrounding the application and determine if there are any issues that might put their bond at risk. They will review an applicant’s job and credit history along with their personal net worth to get a sense of the applicant’s capabilities to handle this fiduciary duty. The bond company wants to know if the applicant is working with a lawyer and getting good professional advice to help them perform their duty successfully. It is your broker’s responsibility to explain what it is the bond company is trying to determine, and help you put together the documentation to demonstrate your capabilities.

Why choose FCA for your estate administration surety bond?

FCA is one of many commercial insurance brokers in Canada. What sets us apart is that within our bond department we have an estate team dedicated to estate bonds. That’s all we do! Like most other brokerages, we have people that specialize in construction bonds, and in condominium bonds; however, there are very few brokers that work specifically with estate bonds. This not only makes us one of the most knowledgeable estate bond brokers, it means we do large volumes of business with bond companies and are able to secure the lowest rates in the marketplace and get approvals fast without any wasted time and effort. In fact, another key difference is our in-house authority. Because all of our brokers have previously worked for bond companies, we are able to approve bonds without submitting the file to the bond company. This makes us fast and easy to deal with.

Why Choose FCA Surety?

Ease of Doing Business

We set the industry standard for turnaround time for both new and existing construction bond clients, you can expect excellence.

Trusted by Surety Markets

Outstanding relationships with all of the most reputable construction surety bond markets in the industry, giving you the power of choice.

Surety is What We Do

Our industry-leading team boasts seven full time dedicated surety professionals with a combined 80+ years of construction surety bond experience.

Testimonials

I required a bond to take over an estate. FCA Insurance was amazing to deal with. Chris Dardarian provided outstanding service, he kept me updated and informed throughout the entire ordeal. He was quick to return my calls and emails and was extremely knowledgeable. The experience was a lot smoother than what I initially anticipated would be a lengthy and stressful process. I would highly recommend FCA to anyone reading this.

Romario

My wife needed to obtain a surety bond as part of the process of gaining guardianship for her father. Neither of us were sure of what to do. We contacted FCA, and were connected to Chris. He was very responsive (in the middle of the first wave of the pandemic), and walked us through what we needed to provide. When it came time to finalize the bond, he was definitely on our side. He pushed hard for the best/lowest fee possible so that we could minimize the impact on my wife’s father’s finances. Furthermore, he and the team at FCA made it very easy to finalize the paperwork and obtain the bond. I would highly recommend FCA.

Mark

I required a bond to take over an estate requested by the court. FCA Insurance has been amazing to deal with. Chris Dardarian offered impeccable service, was quick to answer all my questions and was extremely knowledgeable. It’s great to deal with such a professional team. They turned what I thought was going to be a long stressful process into a breeze. I couldn’t be more impressed.

Kayla

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It all starts with a conversation today with one of our surety bonding experts. Once we determine which type of surety bonds you require, we will work tirelessly to expedite these bonds for you.

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