What if your executor or trustee decides to run off to the Bahamas with all your assets, leaving heirs with nothing? Ohio Farmer’s recent article entitled “What if trustee runs off with assets?” says that safeguards should be in place to protect the heirs of an estate.
The most common way to protect against this possibility is a fiduciary bond. An executor, trustee, or guardian would get a bond early in a probate case and file it with the court. The bond would remain in place while the fiduciary is serving their role. If the fiduciary absconds with estate assets, the bond is there to help the beneficiaries.
This expense would be covered by the fiduciary, who would need to find a bond company willing to issue it. The bond amount is connected to the value of personal property, such as financial accounts, vehicles, and personal effects.
Do you need a bond to cover the value of the land? No. The primary difference is that land can’t be picked up easily and moved, making a bond unnecessary. It’s also tough to transfer land without extensive safeguards. In some cases, court permission is required for a transfer. To sell a farm or ranch, a title company might raise suspicion. Real estate-related actions are also often public records. In some cases, a court action can correct issues or order damages.
It’s possible to waive the requirement of a bond. That’s a default setting for bonds with estates, trusts, or guardianships. Most estate planning documents waive the bond requirement because family members often serve as fiduciaries.
State law may also describe several situations where a bond isn’t required. However, if a party motions the court, and the judge thinks there’s good cause for a bond, one can be required for a fiduciary.
While a bond can provide some critical protections for heirs, the likelihood of a fiduciary running off with assets is low. As a result, most administrations view the bond as an unnecessary step and expense.
However, if a family is concerned about the trustworthiness of a fiduciary, the bond requirement should be reinstated. Remember you should not appoint someone as an executor (Personal Representative) or trustee if you have any doubts at all about their integrity.
The family can petition the court to require a bond if an administration is pending. Consult with an experienced estate planning attorney to determine the role of bonds in your estate plan.
Reference: Ohio Farmer (Nov. 22, 2022) “What if trustee runs off with assets?”