A person who acts in a manner that prioritizes the welfare of another, in this example the beneficiaries of an estate, over their personal interests is known as a fiduciary. In the state of California, a probate bond is often obligatory in order to safeguard the interests of the estate, the heirs of the estate, and any parties who are owed money. The courts in California take very seriously the responsibility that falls on the shoulders of a fiduciary. While the surety bond protects the beneficiaries of the estate as well as the creditors of the estate, it also protects the fiduciary by ensuring that they carry out their responsibilities in a responsible manner.
These bonds serve as an additional line of defense against theft, fraud, or any other illegal activity committed against the estate or its beneficiaries. Fiduciaries have significant authority over a person’s financial affairs, real estate holdings, and other major assets.
A fiduciary may perform the following, depending on the nature of the estate: carrying out an inventory of the estate’s assets and protecting them; communicating with beneficiaries and potential heirs; commissioning an appraisal of the estate; paying off the debt incurred by the estate; ensuring that taxes are accurately computed and paid; as well as the distribution of the estate’s assets.
Having a surety bond that has been filed with the probate court provides family members, heirs, and other key stakeholders with an avenue for action if the fiduciary behaves in an unlawful or unethical manner.
It is not unheard of for a deceased to have sought the counsel of an attorney when drafting their will. The will may contain a provision waiving the bond requirement if the decedent chooses. Of course, the preferences of the decedent may be taken into consideration by the probate court when deciding whether or not to waive the bond; nonetheless, the court always has the last say in such issues.
The other common scenario where a bond may not be necessary involves all of the beneficiaries agreeing to waive the bond and informing the probate court of their decision to do so. This workaround is used when the cost of a bond is disproportionately high in relation to the estate or when there are other reasons why a bond is not desired. Although this factor will typically tilt the scales in favor of waiving the requirement for a probate bond, if the fiduciary lives outside of California, the California probate court will almost certainly ignore the wishes of the beneficiaries and insist that a surety bond be obtained.
The court in which the estate’s petition to open probate is filed is the one that receives claims against probate bonds. There will be a time set aside for both the party who filed the complaint and the fiduciary to submit their evidence. Suppose the party who filed the complaint can provide evidence that the activities made by the executor or fiduciary were not in the estate’s best interest or breached the court’s approval. In that case, the court may enter a judgment against the bond and the fiduciary. This judgment may include amounts for any actual loss to the estate, interest on that amount, and the complaining party’s attorney fees incurred due to the lawsuit.
Even in cases where the bond is sufficient to satisfy the judgment, the fiduciary will ultimately be accountable for paying bond claims in full regardless of whether or not the bond was sufficient. This is because the claim amount is not limited to the total amount of the bond (including legal costs). To get the probate surety bond, the fiduciary is required to sign an indemnity agreement. This agreement is a legally binding contract that promises the fiduciary’s business and personal assets if the fiduciary is found to be the cause of a bond claim. When necessary, sureties will seek and secure judgments against fiduciaries to enforce the rights granted to them by the indemnification agreement. These judgments can serve as liens against real estate and personal property and be used to garnish wages and bank accounts.
The Law Offices of Alice A. Salvo highly advises the executor to retain the services of a law firm to assist in estate administration. An experienced probate and estate planning attorney should draft the documentation needed to open and close the estate and counsel you through this legally complex process. We take satisfaction in being able to help with every aspect of estate administration at the Law Offices of Alice A. Salvo. Call us at 818-676-9572 for a free consultation.