Fiduciary Bond
What Does Fiduciary Bond Mean?
A fiduciary bond is a type of insurance protection mandated by a court to ensure the faithful performance of a personal representative. Through this bond, a bonding company agrees to cover losses incurred when a representative, guardian, administrator, executor, or any individual in a similar role commits an error or acts improperly, thus paying the amount that the ward would otherwise be entitled to receive.
A fiduciary bond is also referred to as a surety bond, executor’s bond, or administrator’s bond.
Insuranceopedia Explains Fiduciary Bond
If an executor of a will, for example, chooses not to adhere to the instructions of the testator, the bonding company will be liable for any losses incurred by an entitled heir. Given this level of risk, bonding companies typically assess the credit standing and background of the representative before issuing the fiduciary bond.
It is important to note that not all guardians are required to obtain these bonds. Personal needs guardians are generally exempt from producing a fiduciary bond, while property management guardians and administrators or executors of an estate are almost always required to post one.
