What is a Bond

A fiduciary bond is a type of surety bond that provides financial protection to beneficiaries when a court-appointed individual (the fiduciary) fails to fulfill their legal obligations. In simpler terms, it's an insurance policy that ensures someone trusted to manage assets or make decisions for another person acts responsibly and honestly. Normall, it is required by the courts before you can be appointed to carry out your fiduciary duties.

Purpose:

Protection: Fiduciary bonds safeguard beneficiaries and creditors from financial losses caused by the fiduciary's:
- Dishonesty (e.g., embezzlement, fraud)
- Negligence (e.g., mismanagement of assets)
- Failure to comply with court orders
Accountability: They ensure the fiduciary is held accountable for their actions.
Legal Requirement: Courts often mandate fiduciary bonds as a condition of appointing a fiduciary

There are three (3) essential parties involved in a probate bond:

Principal:
- This is the person who is required to obtain the bond.
- They are the individual appointed by the court to manage the estate.
- Examples include:
  - Executors (those named in a will)
  - Administrators (those appointed when there's no will)
  - Guardians (those managing affairs of minors or incapacitated persons)
  - Conservators (those managing financial affairs of incapacitated persons)
- The principal is responsible for fulfilling the obligations outlined by the court and the bond.
Obligee:
- This is the party that requires the bond and is protected by it.
- In probate cases, the obligee is typically the court overseeing the probate process.
- The court mandates the bond to safeguard the beneficiaries or heirs of the estate.
- The obligee has the right to file a claim against the bond if the principal fails to perform their duties.
Surety:
- This is the insurance company or bonding company that issues the bond.
- The surety guarantees that the principal will fulfill their obligations.
- If the principal defaults or breaches their duties, the surety will pay the obligee (the court or beneficiaries) for the losses, up to the bond amount.
- The surety assesses the principal's financial stability and risk before issuing the bond.
- The surety then will attempt to recover the funds from the principal.

In summary:

The principal is the one who needs the bond.
The obligee is the one who requires and is protected by the bond.
The surety is the one who provides the bond and guarantees the principal's performance.

This three-party agreement provides financial security and legal assurance to protect the interests of the estate's beneficiaries.