There are two fundamental procedural avenues that are followed when initiating proceedings in the Surrogate’s Court to administer a decedent’s estate. If the person died testate (having left a Last Will), the proceedings concern the Probate of the purported Will. If the person died intestate (without a Will), the proceedings are determined to be an Administration of the estate.
It is fairly common that a fiduciary or beneficiary of an estate may receive information that the fiduciary must be bonded or receive a bond in order to complete his appointment by the Surrogate’s. Court. The bonding requirement of an Executor (when a Will is probated) or an Administrator (in an intestate estate) is not as mysterious as it may sound.
A bond is essentially an insurance policy issued by a surety company that provides security for the estate assets. If the fiduciary misappropriates or improperly takes estate assets, the bonding company may be required to reimburse the estate for the loss and, in turn, try to recover the lost assets from the fiduciary.
In view of the financial risk that a surety incurs by issuing a bond to a fiduciary, the surety company will require that the fiduciary have a solid financial and credit background. I have been involved in a number of matters where a person was approved by the Surrogate’s Court to act as an Executor or Administrator only to be rejected by the bonding company. If the prospective fiduciary cannot obtain the bond required by the Court, he most likely would need to forfeit his appointment in favor or an alternate fiduciary who can satisfy the bonding company.
The amount of the bond required by the Court depends upon many factors. Primarily, the value of the decedent’s estate is the starting point. The greater the value of the assets, the larger the required bond. The bonding company will charge the estate an annual premium for the cost of the bond. The larger the amount of the bond, the larger the premium cost.
It is not uncommon to see standard language in a Last Will to the effect that the requirement of obtaining a bond by the Executor is waived. In most probate matters, the Court does not require the posting of a bond. However, there are a number of situations where even in probate proceedings the Court may require that a bond be filed with the Court as a condition to the fiduciary’s appointment. For example, if the Court is asked to issue Preliminary Letters Testamentary, Surrogate’s Court Procedure Act (SCPA) Section 1412(5) gives the Court discretion to require a bond.
The appointment of an Administrator in an intestate estate usually requires the filing of a bond (SCPA 805), although the filing can sometimes be avoided if all of the estate beneficiaries agree that the filing be dispensed with.
After Estate Settlement has been completed, the fiduciary is required to make a final distribution of estate assets to estate beneficiaries. When all beneficiaries have signed a Release Form or the Court has issued a Decree settling the fiduciary’s Accounting, the bond will be terminated.
I have represented many fiduciaries who have been required by the Court to obtain a Surety Bond. New York Estate Attorneys typically contact various agencies that act as brokers in connection with the Bond Application Process. Since it is not always easy for persons to qualify for a bond, it is a good idea to speak with a bonding company before papers or Petitions are submitted for Probate or Intestate Administration to get a preliminary determination as to whether the person applying to be appointed as a fiduciary can qualify for a bond required by the Court. I work closely with my clients in all aspects of estate administration and assist them with their bond applications.