A surety bond definition may not be adequate to understand a bond fully and why it is needed. Take an Executor Bond in Texas for example. Here is a standard surety bond definition:
“Personal Representative Bonds, also referred to as Administrator or Executor Bond) guarantee the faithful performance of the Personal Representative in their duties to handle an estate.”
While this gives an overview of why the bond is required, we know our clients may want more background on executor bonds. Today, we will look at Executor Bond in Texas and its state regulations.
Executor bonds are mandated by the state of Texas for whoever serves as administrator or personal representative of a decedent’s estate. The executor is charged with properly settling an estate and protecting its assets. Other responsibilities including notifying all beneficiaries and heirs named in the will, handling a creditor’s claim to an estate, paying taxes, and filing all appropriate forms. The court requires a surety bond to protect the estate and its creditors in the event these actions are not carried out dutifully.
The presiding judge will set the amount of the surety bond. Typically a hearing is held to discuss the amount of cash necessary to operate the estate (business, farm), how much revenue the estate is expected to draw within one year (dividends, interest), the value of assets (stocks, securities), as well as estimated debts (money owed by ward). Based on that amount the judge determines how much the bond amount should be to protect all creditors.
Texas law states that all executors must be bonded, however, this law is not absolute. There is no need for a bond when either a) an administrator puts up cash collateral or b) the need for a bond is waived by the decedent in a will.
Executor Bond in Texas state statute states:
(b) Corporate Fiduciary Exempted From Bond. If a personal representative is a corporate fiduciary, as said term is defined in this Code, no bond shall be required.”
The presiding judge makes a final ruling on the necessity of an executor bond. Even if a will includes a provision claiming a bond is unnecessary, a judge may feel it is necessary to protect the full interest of the creditors of an estate.
One of the benefits of using a bond instead of cash is limiting expenses. With a bond, a client only has to pay a percentage of the bond amount, a minimum of $100. Alternatively, a client would have to prove he/she could financially cover the estimated value of the estate. This could be difficult. To discuss benefits of surety bonds and the cost of an executor bond further, contact Jurisco.