To understand Fiduciary Bonds, it is important to understand what, or who rather, a fiduciary is.
Who is a Fiduciary?
A fiduciary is an individual who is granted power over another person’s interests or assets. A fiduciary is bound by a legal or ethical relationship of trust. Typically, a fiduciary takes care of another person’s money when such an individual no longer can manage their finances on their own.
Fiduciaries can be named in a will, but in absence of a will, the spouse or child of the decendent is given first preference, followed by other relatives. If no relatives step up to fulfill the fiduciary duty, then the case goes to probate court and a judge will appoint an individual whom qualifies and meets the requirements of a fiduciary.
You can learn more about the probate process to understand the appointment of a fiduciary if there is no will.
What is a Fiduciary Bond?
A Fiduciary Bond protects against fraud, embezzlement, or dishonest acts carried out by a fiduciary. The bond also holds the fiduciary liable for any deficits that may occur.
If a fiduciary commits fraud, embezzlement, or does not act in accordance with their appointment, a claim can be made against their bond. You can learn about how the bond claim process works.
Who Needs a Fiduciary Bond?
Not all fiduciaries will need to get bonded. If you are required to get bonded as a fiduciary, you will be notified by the court.
Sometimes, Fiduciary Bonds might be requested by beneficiaries or creditors who are concerned about the integrity of the fiduciary. When corporate fiduciaries are involved (banks, trust companies, etc), Fiduciary Bonds are not usually required because of the low risk involved that these entities could repay the surety if a claim was paid out.
How Much Does a Fiduciary Bond Cost?
Fiduciary Bonds range in amount, therefore they range in cost. Usually your Fiduciary Bond amount will be based on the value of the estate, along with other factors.
You do not need to pay the full bond amount to get bonded. You will pay just a small portion of the total bond amount.
For example, if the court requires you to get a Fiduciary Bond in the amount of $100,000, you will not need to pay $100,000. You might only need to pay $400 - $600 depending on your approval.
If you are required to get a Fiduciary Bond, Surety Solutions can help. Get a free quote for your bond below.
Common Types of Fiduciary Bonds
- Personal Representative Bond
- Executor Bond
- Trustee Bond
- Administrator Bond
- Receiver Bond
- Conservatorship Bond
- Guardianship Bond
Roles and Duties of a Fiduciary
All fiduciaries are different, therefore they all are required to fulfill different duties. For example, an Executor’s duties might include taking possession of a decedent’s property, arranging assets for appraisal, collecting and paying debts on the decedent’s estate, and distributing remaining assets.
A Trustee, on the other hand, has responsibilities such as conducting audits, determining claimants, and objecting to improper claims. Guardians and Conservators have the additional responsibility of caring for a minor or incapacitated individual.
Whether the responsibilities are many or few, they all must be carried out ethically and honestly, and the fiduciary must adequately protect the assets or property he/she controls. There is a high degree of loyalty involved in being a fiduciary. It is the highest standard care at either equity or law.
By nature, anyone giving financial advice or handling funds is considered a fiduciary. However, if individuals are working for a company, the bond the company is required to obtain is a fidelity bond, which is different than a Fiduciary Bond.
Fiduciary Bond Example
For example, if Linda Ruth is elderly and can no longer manager her finances and she didn’t appoint anyone as her fiduciary, the court might appoint Roger, her son, as such. Since Roger will be managing his mother’s finances and her estate, he might need to secure a Fiduciary Bond.
The bond eliminates the fear that Roger will sell his mother’s estate, embezzle her money, or run off with everything all together. If it is determined that Roger is not carrying out his duties and abiding by his mother’s wishes, someone can make a claim against Roger's bond. If the claim is determined to be valid and Roger does not fulfill the claim, the surety company who issued the bond will step in and fulfill the claim for him. In this case, fulfilling the claim would likely involve reimbursing Linda Ruth. Because of the nature of surety bonds, the surety company would then go to Roger for reimbursement of the money.
By the chance that Roger wants to be relieved of his fiduciary duties, he will have to find a suitable replacement and then obtain court permission to resign. Until then, he is responsible for all of his obligations and will be held accountable as such.
Fiduciary Bonds are an important protection aide for individuals who may not have any other recourse. The bonds offer financial protection, and provide peace of mind for all individuals involved.
What is a Fidelity Bond?
A Fidelity Bond, sometimes known as a Dishonesty Bond, protects an employer from losses caused by fraudulent or dishonest acts by its employees. Such acts might include embezzlement or theft, just like as in a Fiduciary Bond.
Some fiduciaries might want to secure a Fidelity Bond in conjunction with their Fiduciary Bond. You can learn more about Fidelity Bonds and how to get one.
Being a fiduciary comes with a great deal of responsibility. You must act wisely, prudently, and keep the decendent's wishes in the forefront of your mind at all times. Becoming knowledgable on all the duties that are required of fiduciaries is vital to ensure you can indeed fulfill your duties as appointed.
Already decided you are ready to be a fiduciary and need your bond? Surety Solutions can help you get free quotes for your Fiduciary Bond, today!