A fiduciary is someone who has a duty or responsibility to protect the interest of another party. The fiduciary has an ethical and moral responsibility towards his/her ward. A fiduciary could be named in a will or he/she could be appointed by the court. In the latter case, the court often demands a court &fiduciary bond.
A fiduciary bond is meant to protect against any unethical or dishonest behaviour such as embezzlement or fraud by the fiduciary. The bond must be finished by the fiduciary before taking on the duties.
Here are some the four facts you need to know about fiduciary bonds:
Fiduciary bond is a type of court bond
A court bond is another term for surety bonds that are required by a court. These bonds are meant to minimise the risk of any financial loss or to ensure that the court’s mandate is carried out. Court bonds are generally categorised into Judicial Bonds and Fiduciary Bonds. This is why this bond can sometimes also be referred as court & fiduciary bond.
It is for the protection of the ward
As a type of surety bond, it is meant to protect the interest of the ward. In case of any irregularity, the court can demand compensation through the surety bond. The bond, hence, acts as a deterrence against any dishonest practises in harming the ward’s interests.
Not all fiduciaries are required to be bonded
Not all fiduciaries need to get bonded. Some fiduciaries are named in a will. Typically a fiduciary bond is requested by the court to ensure that there are no irregularities in the execution of duties. Sometimes, a fiduciary bond can be requested by creditors in a corporate transaction to ensure the fiduciary’s honesty.
The bond amount can change
The amount of the bond does not stay the same over time. If new assets are discovered, the bond amount will go up. Alternatively, if the estate is reduced in some way, the amount will come down. Bonds are also revised annually. This means that a long-term bond will mean higher payment in the form of premiums. This could be reduced in States where the law permits a blocked account for the bond.
Getting a bond depends on your credit history
Like most bonds, court & fiduciary bonds also depends on one’s credit history. Bond companies will do a thorough search of the credit history before issuing the bond. Higher the bond money, more detailed will be the investigation into the credit history.