What is a Foreign Executor Bond & What Does it Guarantee?
A Foreign Executor bond, or Estate Bond, is usually required where an executor appointed in a will resides out of the province overseeing the estate. Like any surety bond for estate executors, a foreign executor bond is insurance for the beneficiaries against mismanagement of an estate by the executor. The mismanagement of an estate could be considered:
- incidental, from a lack of understanding of estate procedures;
- or intentional, such as taking assets for personal gain that were due to other relatives.
Nature of the Obligation
The Foreign Executor Bond is meant to ensure the Principal will faithfully perform their duties as executor.
The Executor’s responsibilities include:
- Filing an inventory of the assets and liabilities of the estate with the Court
- Paying all legitimate creditors of the estate
- Distributing the remaining assets of the estate to all legitimate heirs
- Preparing an accounting of all transactions. This includes a final accounting after all creditors have been paid. This may also include an annual accounting if the executor takes more than a year to fulfill their duties.
What Factors does the bond company consider?
There are certain requirements that the bond company considers when looking at applicants for Foreign Executor Bonds. Bond companies carry out a vetting process known as underwriting. This process ensures that the risk of issuing the Foreign Executor Bond is well understood before proceeding.
Here’s a list of factors taken into consideration when deciding whether a foreign executor will qualify:
- Country of Residence: Geography can act as a major obstacle when administering an estate. The bond companies typically require that there is reciprocal agreement in place with countries of residence for foreign executors. Thus, if the executor mismanages the estate and there is a claim against the Foreign Executor Bond, the bond company is able to pursue the applicant legally to recover their loss.
- The Character and Stability of the Principal: There are several factors considered when underwriting the applicant’s character. Is the individual a long term resident of their local community? Do they have an established, reputable and stable career? And most importantly are they financially stable? If all these are in order, the bond company has confidence that there is no incentive to misuse estate funds.
- Disagreement among the principals: A major item the bond company looks at when considering Foreign Executor Bonds is the relationship among the beneficiaries. Do they all consent to the naming of the trustee? The bond company may require additional information surrounding any disputes before agreeing to issue a Foreign Executor Bond.
- Estates in litigation: If the estate is in litigation and the estate is settled incorrectly, the Foreign Executor Bond could be claimed against. In these situations, more information would be required to give the bond company adequate comfort that things will go smoothly.
Joint Control & Involving a lawyer
To qualify for a Foreign Executor Bond, a foreign executor will often be required to enter into something called a joint control agreement with their lawyer. Depending on the complexity of the estate, the joint control may be required only for disbursements that exceeds certain monetary limits. In some cases, the lawyer is more directly involved and must co-sign all estate transactions.
Involving a lawyer throughout the entire estate settlement will always give the bond company comfort that things will be done properly, hence reducing or eliminating the risk under the bond. In most cases, the bond company will require an attorney be retained if it has not already happened.
As you can see it is important to understand the process, and involve a surety bond broker who understands what is required to qualify for a bond. Without educated professionals, this can be a long and frustrating process that makes settling the estate and moving on even more difficult.
How to Apply
In order to apply for a Foreign Executor Bond, the following documents are required:
- Inventory of the Estate of the Deceased Person
- Personal Net Worth Statement of the Deceased Person
- Death Certificate
- Last Will (if available)
- Application of Appointment for Approval to the Court
Once the paperwork is in place, the turnaround time is generally 2-4 hours for Foreign Executor Bonds.
With any questions, please call us at 1-888-241-5656