Appointing a non-resident as your executor? Here is what you need to know about administrative bonds.

will lawyer estate ottawaActing as an executor (estate trustee) can be a daunting and challenging task in the best of times. The requirement for an administrative or estate bond can add another layer of complexity to an already complicated situation.
An administrative or estate bond may be required in various situations. For example, an executor (estate trustee) or individual applying for a Certificate of Appointment of Estate Trustee (probate) may be required to post a bond where, for example, the deceased did not leave a Will, the executor named in the Will is not a resident of Ontario or the individual applying to the Court was not named in the Will as an executor.When required, an administrative bond is purchased by the executor from a bonding or surety company. The application process can be quite onerous and lengthy. It requires, at a minimum, full disclosure of the assets and liabilities of the estate. It also requires the executor to divulge much personal information and undergo both background and credit checks.

Exactly what is an administrative bond?

One can think of an administrative bond as an insurance policy. It ensures that the beneficiaries will be compensated for any negligent or fraudulent acts of the executor. Should the executor not act in accordance with his or her fiduciary duties, a claim may be filed by a creditor or beneficiary of the estate with the surety company.
As part of the application process, the executor is required to sign an indemnity agreement with the surety company. This allows the surety company to then go after the executor if any claim by a creditor or beneficiary is found to be legitimate and is subsequently paid out. In this way, a bond ensures that the executor is personally liable for not properly administering the estate and is meant to act as a deterrent to any improper actions on the part of the executor.
The Estates Act requires the total value of the bond to be at least double the estate value as set out in the probate application. The details of the bond are dependent upon both the perceived risk of the applicant and the complexity of the estate. The annual premiums for the bond can be paid for out of the estate. The bond is held in the custody of the court until it is cancelled. This occurs once the court is satisfied that the estate has been properly administered.

Can the amount of the bond be reduced? Eliminated altogether?

The Estates Act also gives a judge the discretion to reduce or entirely eliminate the need for a bond “under special circumstances”. Eliminating the bond requires an order to dispense with the bond. Many factors are taken into account by the judge in making a determination. Generally speaking, the bond may be dispensed with where all of the beneficiaries of the estate are capable adults and all of the debts of the estate have been paid or the judge is satisfied that the creditors will be adequately protected.

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