Before a personal representative is appointed, the probate court may require a bond be posted. The bond helps ensure that the personal representative does not abscond with or mismanage estate property to the detriment of creditors and heirs.
A bond is not required if there is a will and the will waives the requirement of a bond for the person who is appointed. A bond is also not required for corporate fiduciaries who serve as the personal representative.
Absent an express waiver in a valid will or a corporate fiduciary, the probate court may require a bond be filed before it appoints the personal representative. Whether a bond will be required depends on:
The probate court may also require a bond if there is a complaint filed alleging that the executor is wasting, mismanaging, or misapplying the estate and, as a result, either a creditor may probably lose the creditor’s debt or a person’s interest in the estate may be diminished or lost.
When required, the bond has to be filed with the probate clerk within 21 days after letters testamentary are issued or revoked.
The cost of a probate bond varies based on the amount that is the subject of the bond.
The probate court has discretion to set the amount of the bond. The general rule is that the bond should be set in an amount to protect the estate and the estate’s creditors. If the personal representative is the only heir and entitled to all of the estate property, the bond can be limited to just an amount to protect the estate’s creditors.
There are quite a few bond companies that offer probate bonds in Texas. Rates vary widely, but generally a bond of $10,000 may only cost $100; whereas, a bond of $1,000,000 may cost $3,000 or more. The bond company sets the rate based on the complexity of the estate, the credit, etc. of the personal representative, and the assets that are in the estate. It may turn out that even if the personal representative is otherwise qualified, they may not be able to serve if they cannot qualify for or afford to post a bond. This is why most wills specifically waive the requirement of a bond.
Once appointed, the personal representative can use estate assets to satisfy or to reduce the amount of the bond fees charged by the bond company. In other cases, the court may approve the use of estate assets to satisfy the bond company or to reduce the amount of the bond fees charged by the bond company.
The bond fees are usually due annually. This can encourage the personal representative to work diligently to close the estate.
To be appointed, the personal representative has to start the probate process in court. We’ll address this topic next. Click here to continue reading. >>>>
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