Obtaining a probate bond is a fundamental aspect of the probate process in Ohio, ensuring the protection of an estate's assets and the interests of beneficiaries. Whether you are an executor (someone nominated in a will to administer the estate), or an administrator (an applicant to administer an estate that does not have a will), understanding the intricacies of acquiring a probate bond is crucial. In this guide, we will delve into the essentials of obtaining a probate bond in Ohio and the steps involved.

What is a Probate Bond?

A probate bond, also known as an executor's bond or fiduciary bond, is a type of insurance that provides financial protection for the estate and its beneficiaries in case of mishandling or misappropriation of funds by the executor or administrator. This bond acts as a guarantee that the duties of the fiduciary will be carried out diligently and ethically.

Step 1: Identify the Need for a Probate Bond

Not all estates require a probate bond in Ohio. The need for a bond is typically determined by the probate court based on the size of the estate and the terms of the will. If the decedent's Will explicitly waives the bond requirement, or if all beneficiaries agree to waive the bond, it may not be necessary. However, if the court determines that a bond is necessary to protect the estate's interests, the executor will need to obtain one.  Please note that if the decedent's Will nominates an Executor who resides outside of the State of Ohio, even if the Will expressly waives the bonding requirement, the probate court will require that that person post a probate bond in order to be appointed and receive their Letters of Authority.

Step 2: Determine Bond Amount

The probate court will determine the required bond amount based on the value of the estate.  This amount serves as a safeguard against potential financial losses that could arise from mismanagement or negligence.

The bond is typically set at twice the value of the property in the probate estate.  Some judges will include the value of the real estate in this calculation and others will exclude it.  In most cases, if the Will waives the bonding requirement, the Court will only require that an out-of-state executor post a bond that is equal to the value of the estate property.

Step 3: Contact a Surety Bond Provider

To obtain a probate bond, you will need to work with a reputable surety bond provider. A surety bond is essentially a three-party agreement involving the principal (executor/administrator), the obligee (probate court), and the surety (bond provider). The surety is responsible for compensating the obligee in case of a valid claim against the bond.

Step 4: Application and Underwriting

The executor must complete a bond application provided by the surety bond provider. The application will require information about the executor's financial history, background, and qualifications. The surety will conduct underwriting to assess the risk involved in issuing the bond. Factors such as credit history, financial stability, and professional experience will be considered.  Many sureties will require the applicant to have an attorney to represent them in the estate administration process.

As the value of the bond increases, the more rigorous the approval process will be.  Please be aware that applying for a bond is like applying for a loan in that not all applicants will be capable of getting approval.  If this happens, then most likely the applicant will not be able to serve (unless they successfully petition the probate court to lower the bonding requirement).  In those cases, the alternate executor/administrator may apply.  If no alternates are named (or capable of being bonded), then beneficiaries who reside in Ohio may apply.  If there are no qualified applicants, then an attorney may need to apply for authority to administer the estate.

Step 5: Premium Payment

Upon approval, the executor will need to pay the bond premium, which is a percentage of the bond amount. The premium amount is determined by the surety based on the applicant's risk profile. It's important to note that the first year's premium is not refundable.  If the estate administration lasts for several years, then the bonding company may prorate a refund when the estate is closed and the fiduciary is discharged.

Step 6: Bond Issuance

Once the premium is paid, the surety will issue the probate bond. The bond document will outline the terms and conditions of the bond, including the bond amount, the parties involved, and the obligations of the executor.  The executor or administrator will need to sign the original bond, then that bond is filed with the probate court.  Once the probate court has the original bond then they will issue the Letters of Authority.

Step 6: Administer the Estate Properly

An executor or administrator who fails to properly fulfill their fiduciary duties can be held personally liable for assets that are lost or misappropriated.  If that happens, the bonding company will likely pay the beneficiaries for the losses then seek to recover that payout from the personal assets of the executor/administrator who failed in their obligations.  This is why the application process is rigorous…the surety wants to ensure that they can recover any funds that they pay out on a claim.  At Ibis Legacy Law, LLC we carefully guide our clients to ensure that they are following all probate Court rules to avoid any potential claims against the bond.

Conclusion

Obtaining a probate bond in Ohio is a critical step in the administration of estates, ensuring that the fiduciary's responsibilities are carried out with integrity and accountability. Executors and administrators should be prepared to navigate the process of identifying the need for a bond, determining the bond amount, and working with a reputable surety bond provider. At Ibis Legacy Law, LLC we can help you obtain a probate bond and fulfill your fiduciary duties.

Disclaimer: This content is for informational purposes only and is not intended to provide, nor should it be relied upon as, legal advice, nor does the receipt of this content create an attorney-client relationship.