What Is a Probate Bond? How It Protects an Estate and Its Beneficiaries | Repair The Roof Podcast

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In this conversation, Attorney Ted Gudorf and Chrissy O'Neil from Ferneding Insurance discuss the intricacies of probate bonds, including their necessity, the process of obtaining them, and the responsibilities of fiduciaries. They explore when a probate bond is required, the nature of the bond as an indemnification agreement rather than insurance, and the costs associated with securing a bond. The discussion also covers how bond amounts are determined, the implications of estate planning on bond requirements, and the jurisdictional aspects of bond issuance.

A Probate Bond Can Protect an Estate—But It Can Also Create Responsibilities Many Fiduciaries Never Expect

You agree to serve as the executor or administrator of a loved one’s estate.

Then, before the probate court will even appoint you, you discover there may be another requirement: you need a probate bond.

For many families, this comes as a surprise.

Probate bonds are an important part of the court process in certain estates and guardianships. They are designed to protect estate assets and the people ultimately entitled to receive them.

But there’s something many fiduciaries don’t realize until they’re already involved:

A probate bond does not necessarily protect the person administering the estate from personal financial responsibility.

Understanding that distinction can make a significant difference when you’re deciding whether to serve as a fiduciary—or planning your own estate.

What Exactly Is a Probate Bond?

A probate bond is a financial safeguard that a court may require when someone is appointed to administer an estate or serve as a guardian.

Its purpose is straightforward: protect the assets under the fiduciary’s control.

If an administrator improperly uses estate funds, fails to follow required procedures, or makes certain mistakes that result in a loss, the bond can provide a mechanism for restoring money to the estate.

This matters because executors, administrators, and guardians have significant control over assets that belong to someone else.

They may be responsible for:

  • Identifying and safeguarding assets
  • Paying appropriate estate expenses
  • Following court orders
  • Completing required filings
  • Making distributions to the proper beneficiaries
  • Meeting important court deadlines

Even a well-intentioned person can make a costly mistake.

That is one reason probate bonds exist.

Probate Bonds Aren’t the Same as Traditional Insurance

This is one of the most important distinctions to understand.

You might hear the word “bond” and assume it functions like an insurance policy protecting the executor or administrator.

Generally, that isn’t how it works.

A probate bond is an indemnification arrangement involving the fiduciary and the surety company.

If the court determines that estate assets need to be restored and there is a valid claim against the bond, the surety company may provide funds up to the applicable bond amount.

But that doesn’t necessarily mean the fiduciary walks away without consequences.

The fiduciary may be required to reimburse the surety company.

In other words, the bond is designed primarily to protect the estate and its beneficiaries—not to eliminate the fiduciary’s responsibility.

That distinction is easy to overlook when someone agrees to “help the family” by handling an estate.

You Don’t Have to Steal Money to Create a Problem

When people hear about a bond claim, they may picture an executor intentionally taking money from an estate.

That can happen.

But intentional misconduct isn’t the only potential issue.

Sometimes, the problem begins with an honest mistake.

Imagine an administrator distributes estate assets without identifying everyone legally entitled to inherit. Or perhaps the administrator pays an expense before receiving the necessary approval.

The fiduciary may have acted with good intentions.

But good intentions don’t automatically eliminate the consequences.

Estate administration involves real legal responsibilities, deadlines, filings, and rules about how money can be handled.

That is why serving as an executor, administrator, trustee, or guardian should never be treated as merely an honorary family role.

You are taking on a fiduciary responsibility.

When Can an Estate Avoid a Probate Bond?

Not every probate estate requires a bond.

One important factor can be the estate planning documents themselves.

For example, a properly prepared will may name an executor and provide that the bond requirement is waived for that individual.

Why would someone do this?

Usually, because the person creating the will has specifically selected someone they trust to administer the estate and does not want that individual to face an unnecessary bonding requirement.

Trust documents can also address whether a bond should be required for the person serving in a fiduciary role.

But there’s an important complication.

What happens if the person you named can no longer serve?

Perhaps your chosen executor dies before you, becomes unable to serve, or simply declines the responsibility.

Depending on the circumstances and applicable law, the person who eventually steps into the role may face requirements that your original choice would not have faced.

That is one reason estate planning should look beyond simply naming one person on a document.

You also need to consider what happens when Plan A is no longer available.

Guardianships Can Create an Even Longer Bonding Obligation

Probate bonds aren’t limited to estates after someone dies.

They can also play an important role in guardianships.

When someone is legally deemed unable to manage their affairs and a guardian is appointed to oversee assets, the court has a strong interest in protecting those assets.

A bond may therefore be required.

And unlike an estate administration that eventually closes, a guardianship can continue for years—or even decades.

That may mean the bond must be renewed annually while the guardianship remains open.

The purpose remains the same: protecting the assets belonging to the person under guardianship.

It is another reminder of why incapacity planning deserves attention before a crisis occurs.

How Do You Get a Probate Bond?

When a bond is required, it may need to be secured before the court will appoint someone to administer the estate.

The process generally starts with an application.

The prospective fiduciary may also sign an indemnity agreement acknowledging potential responsibility if the surety company ultimately has to pay a claim.

Underwriting may include a soft credit check.

Why does credit matter?

Because the bonding company is evaluating the person who will potentially control significant assets.

Financial problems, collections, or other warning signs may affect how the company evaluates the application.

The company may also consider other circumstances surrounding the estate, including disputes among heirs or why a particular person is seeking appointment.

And the size of the bond matters.

Someone who qualifies for a relatively small bond may not necessarily qualify for a much larger one.

How Much Probate Bond Might Be Required?

The bond amount depends on the estate and the applicable court requirements.

In the discussion, one example involved an initial bond calculated at twice the projected probate assets.

Suppose the relevant probate assets are estimated at $100,000.

That could result in a $200,000 bond requirement under the approach discussed.

But determining the amount isn’t necessarily as simple as adding up everything the person owned.

Certain assets may transfer outside probate.

For example, an asset with a valid beneficiary designation or transfer-on-death arrangement may not be part of the probate estate.

Real estate may also be treated differently during the initial calculation, depending on the circumstances.

Then another issue can arise:

What if additional assets are discovered later?

An estate initially estimated at one amount may turn out to be substantially larger after the administrator completes a more thorough inventory.

The bond may then need to be increased.

That means bonding isn’t always a one-time administrative task at the beginning of probate.

The requirement can change as the estate changes.

What Does a Probate Bond Cost?

Probate bond premiums vary according to the size of the bond and other factors.

The transcript provides several examples to illustrate how the pricing can work.

A $100,000 bond, for instance, was discussed with a $250 premium. A $1 million bond was described as costing approximately $1,690 under the pricing structure discussed.

Larger estates can face substantially higher premiums.

These premiums may also be annual, not one-time expenses.

If an estate stays open for multiple years, the premium may continue to be charged each year while the bond remains active.

The good news is that the bond premium can generally be treated as an estate expense in the circumstances discussed, rather than necessarily becoming an out-of-pocket expense that the fiduciary permanently bears.

Still, the longer an estate remains open, the more these recurring costs can matter.

And that brings us to an often-overlooked estate planning issue.

Probate Costs Aren’t Always the Ones Families Expect

When people think about probate expenses, they usually think about attorney fees or court costs.

But probate can create other expenses and administrative burdens.

Bond premiums are one example.

Even when an individual premium doesn’t seem overwhelming, recurring costs can add up—particularly when an estate stays open for several years.

Fortunately, bond requirements may sometimes be reduced as assets leave the probate estate.

Suppose an estate begins with substantial assets requiring a larger bond.

Later, approved distributions are made and only a smaller amount remains under administration.

With the proper court approval, it may be possible to reduce the bond and therefore reduce future premiums.

The important phrase there is court approval.

Changes involving the bond generally aren’t something the administrator simply decides to make independently.

Choosing Your Fiduciary Deserves More Thought Than Most People Give It

One of the biggest lessons from probate bonds has very little to do with insurance or premiums.

It’s about the person you choose to handle your affairs.

Families often name an executor because that person is the oldest child, lives nearby, or seems like the obvious choice.

But administering an estate can require organization, financial responsibility, patience, communication, and an ability to follow detailed legal requirements.

The person may need to work closely with attorneys and other professionals while meeting deadlines and managing assets belonging to other people.

And when family disagreements exist, the role can become even more difficult.

Sometimes a family member may not want to serve.

Sometimes they may not qualify for the necessary bond.

In other situations, a professional may ultimately need to step into the role.

Your estate plan should anticipate these possibilities rather than assuming everything will happen exactly as expected.

The Bigger Planning Question: Can You Reduce These Problems Before They Begin?

Probate bonds serve an important purpose.

When assets are under someone else’s control, safeguards can protect heirs, beneficiaries, minors, and individuals under guardianship.

But needing those safeguards can also reveal something larger about estate planning.

A comprehensive estate plan isn’t simply about deciding who receives your property after you die.

It should also address questions such as:

Who manages your affairs if you become incapacitated?

Who is responsible after your death?

What happens if your first-choice fiduciary cannot serve?

Which assets will actually pass through probate?

Have your documents addressed bonding requirements appropriately?

Have your assets been titled and coordinated with the plan?

These details may seem technical today.

During a family crisis, they can become extremely important.

Don’t Wait Until Probate to Discover What Your Estate Plan Missed

One of the worst times to discover a gap in an estate plan is after someone has died or become incapacitated.

At that point, your family may have fewer options.

Thoughtful planning can help clarify responsibilities, coordinate assets, and determine whether certain court procedures and expenses may be reduced or avoided.

That doesn’t mean every family needs the same documents or the same strategy.

Estate planning depends on your assets, family circumstances, goals, and applicable law.

But understanding how probate bonds work illustrates an important principle:

The details inside your estate plan—and what happens after you sign it—matter.

Watch the Full Video

Want to understand more about when probate bonds may be required, how bond amounts are determined, what they can cost, and what serving as a fiduciary really involves?

Watch the full video for Attorney Ted Gudorf’s complete discussion on probate bonds and protecting an estate.

Conclusion

A probate bond may sound like a minor administrative requirement, but it serves an important purpose: protecting assets that belong to an estate, beneficiaries, heirs, or a person under guardianship.

It can also create responsibilities that executors, administrators, and guardians may not anticipate.

The biggest takeaway isn’t simply whether a bond will be required.

It’s whether your estate plan has been designed to anticipate what happens when someone actually has to use it.

Choosing the right fiduciaries, preparing for incapacity, coordinating your assets, and creating appropriate estate planning documents can make the administration process more predictable for the people you leave behind.

Because a good estate plan shouldn't just explain where your assets go.

It should help your family navigate what happens next.

Transcript: Prefer to Read — Click to Open


Ted (00:00.278)

Welcome everyone. This is Attorney Ted Gudorf. Today we have a special guest. Chrissy O’Neill is with Furniting Insurance, who provides our law firm and many law firms in the Greater Dayton area something called a probate bond. Welcome to the show, Chrissy. Thank you for this opportunity and thanks for having me. So what’s your role at Furniting Insurance? My role at Furniting Insurance is

I am a probate bond associate. I get probate bonds for people, attorneys who need a probate bond. I’ve said that quite a few times, and let me tell you what it is. So a probate bond is an instrument that the court requires anyone who is administrating an estate or becoming a guardian for

Somebody who’s deemed incompetent. The court requires a bond to protect the assets of the estate. Anything that has value to the estate, those assets are protected by a probate bond. So let’s drill down into that a little bit more. Of course. My experience is that most estates don’t require a probate bond. What are those circumstances that you can think of where a bond is not required?

And then we’ll talk a little bit about when it is required. But let’s first start with when you can administer an estate without a bond. Okay, that’s when somebody has a will and it states in the will that the the will dispenses with a probate bond, then you wouldn’t need one. And a lot of times an executor of a will.

can’t serve or has passed and then that stipulation in the will goes out the window. So you would need one. But it’s very important to have an estate plan in place because we don’t want you to have to sign another piece of paper or worry about another document when you’re going through the loss of a loved one. No, we want you to have have the the papers in place that dispense with.

Ted (02:26.124)

A well or a a bond. So what I think I hear you saying is that if somebody creates a will and names an executor, in that will, the common approach is to waive the bond for the executor because it’s somebody that the decedent trusted to handle it without having to be bonded. Is that a fair assumption? That is

That is one hundred percent what we’re talking about. My understanding is though that with living probate or a guardianship, you can’t waive the bond. So if if you don’t have your estate plan in place and a guardianship is required and you have an estate, you’re gonna have to be bonded. And that bond in the living probate or the guardianship is gonna

have to be renewed annually and it’s gonna last for the lifetime of the person who you’re serving as guardian for. Correct. Correct. We we have guardianships that have been going on for decades. We have bonds for those. So every year the bond renews and it just is there in place to protect the assets for the

the the the ward. We don’t want somebody who has gotten into a little bit of a trouble, the guardian, and they they want to borrow some money from the estate. And they’ll take it back and say, I’ll replace the money before the next accounting. And sometimes they don’t, and then the court gets involved with having to get that money back into the estate. It’s it’s to protect

The the the ward and in a a probate the deceased the you know, we want to protect those assets for the the heirs, the beneficiaries. So let me pull back a little bit though before we get into those details. I wanna s go back to where we were at before when we talk about w how we can arrange our estate.

Ted (04:43.302)

For there not to be a requirement for a probate bond. Another example that we talked about, one, we create a will, we name an executor, and hopefully that executor is alive at the time, and we can waive the bond for that person. So that’s one example. A second example is where people use a trust to hold their assets, and in the trust document, it also can have a provision that says

Whether a bond is required or not required. Is that another example? Yes, yes, exactly. the trusts are very important too. So just remember to rely on your attorney’s expertise and make sure that they have that stipulation in your trust and your will that they’re gonna waive the bond requirement. Now I have had circumstances where

A client wants the individual to be bonded because they want their heirs to be protected in case something happens. That that probably in my case doesn’t happen very often, but I have seen that a handful of times in my career. Yes, yes. It happens. They you know, people write their will up, but they still want to make sure that these these protections are in place because things do happen. It’s

Contentious sometimes. Probating somebody’s estate brings out the worst in family members. And you know, a mother or, you know, a decedent can can recognize that. I have had that happen where there is a will in place, but they have not waived the bond requirement. So let’s talk a little bit about this thing called the probate bond itself. Let’s dri drill down into what is it?

What really is it? Is it insurance? Is it indemnification? Is it what what’s really how does how does this thing work? What is this? Okay. All right. It’s like I said, it’s a court requirement. The court requires that if it’s not been waived, everybody get this probate bond. It is an indemnification agreement between the

Ted (07:06.408)

The administrator and the surety company. It’s not insurance. So the surety company is going to step in and make an estate whole. So if there was a claim against the bond, the court will say, Hey, we need these funds paid back. So we’re going to issue an order, the court will, and then the surety company is gonna step in.

Pay up to the bond amount if needed and make the estate whole. That is not saying the administrator is off the hook. They, the administrator, will then pay back the surety company the money. It’s very important. It is not insurance for the administrator. Is an indemnification agreement between

the administrator and the surety company. They will have to pay it back. Now who typically has the right to file a claim then against this bond? Sure. any of the beneficiaries, the heirs, they can raise the issue with the court. They, the heirs and the beneficiaries, cannot just say, hey, this money’s gone. We need it paid back.

they need to raise the issue with the court. The court will then look at inventories filed and any evidence that is brought to them to see if there was misuse of the funds and if there’s any money missing. And then the court will issue an order. That order will will come to us at the the insurance company and we’ll get it to the surety company and

They will they’ll make their own investigation and work with the court to get that that money into the estate. So these bonds are there to protect the estate. And I suppose it doesn’t even have to be an embezzlement or a misuse of funds. I think it could just be a mistake that got made.

Ted (09:24.47)

I think I saw a circumstance where an administrator failed to identify an illegitimate child who was entitled to inherit. And my recollection in that case was the administrator gave all the assets, gave all the assets to a surviving spouse but didn’t give any to the illegitimate child and a mistake was made, so a claim was made against the bond in a circumstance like that.

It was fairly innocent. It wasn’t nefarious. It was just a mistake. Have you seen that kind of circumstance? That happens very frequ yes, I have seen that. And a lot of times it’s just a mistake in paying a bill that the administrator thought was an you know, an estate of expense. Like a funeral expense or something like that.

A lot of times you have to wait and then get paid back from the estate. Once the court allows that expense to come come off, you have to petition the court for like a funeral bill or something like that. But if you just go and pay it right away and then you take the money, you don’t know. So yeah, in things like that, it could be very innocent. There was no intention to fraud the

the estate. But I guess it j it just points out that when you’re serving as an executor or an administrator or as a guardian, that there are real responsibilities, there are real deadlines, and there are orders that have to be gotten from the court. There are orders to the payments. And the worst case scenario is that the fiduciary is personally responsible.

And in the end, while the estate may be made whole by the bonding company, the fiduciary is on the hook to reimburse the bonding company. So they have personal liability. And here they were just trying to help out. Yeah, yeah, yeah. A lot of times a lot of times people don’t understand all that is gonna go into being a fiduciary, being the administrator, being a guardian. There are

Ted (11:47.416)

So many deadlines and just just things that you don’t even think of, like a probate bond. So it is very important to listen to your attorney and follow what they’re saying and don’t put off the phone call with your attorney if they’re calling or their paralegal is call they’re calling and saying, Hey, we need your signature on this. It’s

It’s I can’t stress how important it is to first of all get your affairs in order with an estate, a trust, and then also rely on your attorneys. That’s what they’re there for. Make sure all your filings are completed and done correctly. So let’s

Drill down a little bit further. Let’s say somebody has no estate plan in place, or the executor they named in the will is no longer alive, or they did an online will and it didn’t waive the bond requirement. So now we’re in a circumstance where somebody is going to apply to become an executor or an administrator. And this concept of needing a bond.

My experience is that that bond has to be secured before any filing is made with the probate court, right? Correct. Correct. You have to have that bond in place before that the court will even appoint you as administrator. So how do I get a bond? What’s the process? All right. You’re gonna fill out a simple application. Your attorney most likely will have that on file for us.

And you’re going to, it’s it’s a very simple application, and you’re gonna sign your indemnity agreement at that time, saying that if the bond does come into play, that you will be held responsible for the paying back the surety company if they have to pay out. We do run a soft credit check, which is for underwriting purposes only. It’s not a hit to your credit, but they do run it.

Ted (13:54.208)

And we make sure that there’s no red flags. Some red flags are just slow pays or collections because we’re looking at it. Hey, if you can’t take care of your own finances, how can we trust you to handle somebody else’s? So that’s that’s what we’re looking for. So what I hear you saying is that before you even apply to the court to be appointed, you have to get this probate bond.

To get the bond, you gotta fill out an application, give it to an insurance company like Ferneding Insurance, who will then take that application and submit it up and they’ll do this credit check on you and decide whether they do or don’t want to issue you the bond based upon your credit worthiness. Is that what I’m hearing?

Yeah, it’s basically creditworthiness. Sometimes it’s if there’s dissension among heirs. The surety company doesn’t want to get into a long fight with heirs. So so we kind of look at that. Who is applying? If it’s a friend of the family, we need to know why is a friend and not a family member. You know, in that case it could be just there’s nobody in the state.

That can serve, I should say that you do have to live in the state to become bonded. You can’t live out of state, unless, of course, the will states that you’re an executor and a bond is still needed. But yeah, it’s mainly a credit check, but then there are also dissension among heirs. that’s that’s mainly it. And who and who’s applying?

Why is this person applying other than somebody else? Again, I’ve had, you know, just friends of friends of family apply. And then we have to go back and say, hey, why is this? Are they okay? The air’s okay with this person serving as administrator. And a lot of times it’s it’s innocuous, you know, you just just because nobody else wanted to do it. Nobody else wanted to take the time and do it.

Ted (16:08.236)

You know, so you can be bonded if you have no no interest in the the the assets. So is there any kind of background check, criminal background or otherwise that’s undertaken? No, it’s just the it’s just the credit check. There is a check mark on the application to ask if you’ve ever been convicted of a felony or you know, but I don’t get

any of those applications back. It it’s just just the credit report and kind of what the simple questions are is there going to be a business run, you know, after it’s the estate is probated, things like that. The dissension among the heirs and who are the heirs. So yeah, no background check, just a a soft credit check and the amount of bond too.

sometimes I can get somebody bonded for a thousand dollar bond, but that same person might not be an acceptable risk at five hundred thousand. So let’s talk about the bond amount. How is that bond amount determined at this early stage of the proceedings where we haven’t even filed an inventory of the estate? So let’s how’s that determined?

When you’re going into your attorney’s office, I’m going to assume that you don’t have a will in place. And you kind of just say, hey, mom and dad or dad had this life insurance policy and he’s got the car. And you kind of talk with your attorney about all the assets that you do know about. And you be you get a figure of let’s say a hundred thousand assets. The court requires that the bond amount be double the assets.

So we’re gonna ask for a bond in the amount of $200,000. Well, let me ask you this. Are all assets counted? let’s say I’ve got a house for $250,000. Let’s say I have a car that’s fifty thousand, but I only got $1,000 in my bank account. What’s countable for purposes of this bond? Well, real estate doesn’t have to be included in the initial bond amount. It can be

Ted (18:32.12)

Wait until it’s sold. Initially, real estate does not count. Everything, everything else, you might have a transfer on death for the vehicle. So transfer title only. So that’s not gonna have to be included. If you’re gonna sell the vehicle and become a part of the estate assets, we’re gonna put that in to the estate assets.

So what we’re looking at is not real estate, and then what I hear you saying, we’re only looking at the probate estate and any asset that passes outside of probate, like say perhaps life insurance has a beneficiary or an IRA has a beneficiary, or we have a T O D transfer on death on a vehicle, those are all excluded. Correct. But whatever the what we project the probate estate to be

We’re gonna double that amount. And that’s gonna be the initial bond amount. Correct. Yep. That’s everything there. Like I said, it’s double the amount, is what the court requires. At any time when we’re digging down into it after somebody’s been appointed administrator, you’re gonna go in and you’re gonna find things. There’s a lot of times that we discover a lot more assets.

Just had an example yesterday of we got a $500,000 bond initially. And I got an email from the Paralegal saying, hey, when we did our inventory, assets come out to $550,000. Double that.1 million. So we needed to get another $600,000 in bond. Now what it

What do you do in a situation where you start off with a say a five hundred thousand dollar bond and then they either find assets or as you indicated earlier, you sell the house, and now the real estate is no longer there, it’s converted to money, and so now I’ve got one point one million, but I’ve got a fiduciary who has to submit the application. What if the insurance company denies the additional bond? What happens then?

Ted (20:53.826)

Very, very rarely does the charity company deny additional bonds. I have, in my experience, only had it happen one time and it’s very difficult to deny the person the additional bond. Because we would have to start all over if the charity company does deny the additional bond. So 99% of the time they do allow for the additional bond.

I have had people have to have a control letter and dual control. So the attorney is has to sign all the checks along with the fiduciary. So there there are things in place that that we can do to get the additional bond. Almost nine and a half times out of ten we can do that without

any sort of any sort of bother. We just need a court order and if the court is requiring it, we can we can get it. As you say, it sounds like the surety or the court will work with the administrator to make sure that there’s an appropriate controls in place to to hopefully satisfy the bonding company and hopefully satisfy the court. Of course.

Yeah, ’cause we we don’t want to have to the court would have to close out that bond, issue an order to close it out. You’d have to submit a final accounting for that. We would discharge that bond and we would have to try and start all over. So there are controls in place that we won’t have to do that. Now, in terms of the cost for this bond, how expensive are they and

Who pays that premium? Sure. premium for a bond is going to be up to forty thousand dollars is gonna be a hundred dollars. So you can get a bond for twenty thousand in Montgomery County. The minimum bond is a twenty thousand dollar bond. those are all gonna be a hundred dollars. And anything over fifty thousand, it is

Ted (23:21.908)

Sorry. It’s point zero zero two five. It’s it’s two and a half times the the the assets when we get up to theirs. a hundred thousand dollar bond gonna charge a two hundred and fifty dollar premium. So it so if we have a million dollar estate, it sounds like we’re looking at twenty five hundred dollars. Did I do that math correctly? You did, but we do the surety company at

Seven hundred and fifty thousand, they do start giving you a a small discount. So a million dollar bond is only gonna be one thousand six hundred and ninety dollars. So yeah, at that range. And then there’s other thresholds, five hundred thousand, more, you know, they’ll just they cut they catch a little bit of a break. Okay. At that

On the other hand, if I’ve got a ten million dollar estate, it might be somewhere around fifteen thousand dollars per year. Do I understand that? Yeah, yeah. We have a fifty million dollar estate right now. Off the top of my head, I can’t remember exactly what it is, but I believe it’s thirteen thousand dollars a year for that. So these these are annual premiums.

So, you know, my experience is probably the average estate in Montgomery County is probably a two-year time frame. So so you should be looking at paying that premium probably at least twice. But if if the estate for whatever reason remains open for five years, you’re paying this premium every single year. Correct, correct. And it is an estate expense. So the court does allow

the bond premium to be paid out of estate funds. So that’s that’s who’s paying for it, the estate is. So the individual fiduciary doesn’t have to pay that out of pocket. When they do the initial bond application, do they have to advance those funds or can they do you accept payment later? How does that work?

Ted (25:33.634)

We accept payment after the bond is filed usually. You can pay it before the bond is filed, but once the bond is filed with the court, it’s a live document. So we do want payment when the bond is filed. Sometimes it takes a while to get the estate bank account set up. So we do take that into consideration too. That we’re gonna we’re gonna give you a little bit of time to

get that set up so you can write the check out of the estate checkbook. But some people do pay it out of their own pocket as soon as they get the bill. And I assume I assume the payments are billed a year in advance. Correct. Not a year in arrears. It’s in advance, right? Correct. And any if if the estate closes, say as a partial year.

Do the is there a refund issued if they’ve paid for the whole year? And let’s say the estate is closed after the sixth month, is there any kind of rebate that is given? So the first year is fully earned. If it does close in the first year, that premium is there’s no refund in the first year. But if you get it closed within

A couple months of the renewal coming due annually, the you will get a refund in that second or third year after you’ve paid the renewal. It’s a prorated refund. So we would have to see and typically if you get it closed within sixty to ninety days of that renewal, you’ll get a full refund on that. Yeah. So another circumstance I thought of is what if we have a

and estate and we anticipate that it’s going to go on for a while, but because of the need to s improve and ultimately sell the real estate. But let’s say for the sake of discussion, the initial bond amount was a million dollar bond, but we make the decision to distribute most of the assets out and only retain a minimal amount in the bank account.

Ted (27:53.752)

Can we get the bond reduced during the period of administration so that in years two or three that the bond expense is less than the initial year? Of course, of course. It does have to go through the court and a court order does have to be issued. Anything bond related has to be approved by the court. Any additional, any decreases.

or terminations have to have a court order. But of course, if the attorney, your attorney says, Hey, we only have fifty thousand dollars in assets because we made distributions and whatnot, and we’re carrying a two hundred thousand dollar bond, petition the court, get a court order saying that the bond requirement as of this date, whatever date you

filed the f the accounting, we can get it prorated back to that date. So yeah, you’re not gonna be stuck carrying a a thousand dollar bond premium every year if their assets aren’t in the in the estate anymore, of course. Now in terms of the insurance companies that issue these bonds, are there many companies that do this or are there only a handful? There are quite a few. We work

With the top, I want to say five in the country that do that. This we work with Ohio Casualty, which is a division of Liberty Mutual. That’s who most of our bonds come from. They’re they’re one of the leaders in this type of business. And then also CNA, which is Western Surety, who we work with. They’re one of the top three surety companies. But it’s not something that

I I I wanna say like state farm insurance can’t get you a bond that you need. They’re not going to they call us to get their bonds if they need. But yeah, we we have if we can’t get you bonded with the three or four charity companies that we work with, you’re probably not a good

Ted (30:09.672)

risk. So we would usually ask if an attorney could step in and take over at that point, or if there was another family member, you know, with maybe a little bit better credit score. But we can get you bonded with these three, four companies that we work with. I know in s in several instances, either when a family member does not want to serve or cannot get bonded, oftentimes they’ll ask me to serve.

individually and I will end up applying and taking on the risk of being administrator. Nevertheless, even as an attorney, I am required to be bonded just like anybody else. Absolutely. Yeah. Yeah. We have many attorneys that

Step in in as administrators. Sometimes it’s just the attorney finds it easier. They know that they’re going to follow all the court requirements. They’re not gonna miss a filing date. So yeah, but yeah, you still need to be bonded. There have been cases that I’ve heard around the building in the bond department here at Ferneding of attorneys taking estate assets.

And having a claim filed against them for misappropriating funds. So it’s very important to have these in place, no matter who you are or who you trust. We bond minor guardianships also. So that’s if, you know, a minor has a life insurance policy or something like that come in and they want to protect the assets so the the

The minor will have them when they’re when they turn 18 and will have all the money intact. And there are quite a few people that have taken the money. And when that minor turns 18, all the assets aren’t there. They’re left with, you know, a fraction of what it’s supposed to be. So it is a very important court requirement that you can get away with if you dispense with it in your will.

Ted (32:19.35)

Now in terms of furniture insurance, what jurisdictions are you allowed to issue bonds in? is it just Montgomery County? Is it the state of Ohio? Is it Ohio and Indiana anywhere in the country? What is what is the limits for an agency like Ferneding? So there are three associates in the bond department and the three of us are licensed.

write bonds in all of Ohio. And I do have bonds in any county in Ohio that you can think of. There have been times that I just Google this county’s name because I had never heard of it, you know, just to see where they are in Ohio. But we can get them

our namesake on the building, John Ferneding, he is licensed in Indiana and Michigan and quite a few other states. So if it does come up that we need a bond in Kentucky, we can get that for you. So yeah, we can pretty much all over the the country is we can get you you a bond. But easiest in Ohio, but we can we can take care of you wherever you are if that you need a bond.

All right, Chrissy, I see we’re out of time and I really appreciate visiting with you today and you explaining all these intricacies of these probate bonds. A real critical, important part of our practice. Make sure that the estates are protected regardless of who is serving as the fiduciary. So thanks for your information. Thanks for giving us it freely and being willing to talk to us.

Of course. Thank you so much for the opportunity. Appreciate it. And give our regards to John Fernadig. Of course, I will. Thank you very much, Ted. Thanks, Chrissy. Thank you.

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