Court bonds can be broken into two types; judicial and fiduciary.
Judicial bonds protect against uncertainty in legal proceedings. Examples of these bonds are plaintiff’s bonds, defendant’s bond, appeal bonds or injunction bonds.
Much more common than judicial bonds are fiduciary bonds (also known as a probate bond). A fiduciary bond requires that administrators, committees, executors, guardians or trustees will not only faithfully perform their duties and obligations as outlined, but also in accordance with relevant laws and court orders. This means that the bond protects the person for whom the fiduciary is acting. Some examples of a fiduciary’s responsibilities include giving financial advice or managing an estate.
It is important to note that the bond is always completed in the city, county or province where the fiduciary will be carrying out their duties. As part of the application, the fiduciary agrees to pay the amount of the bond if he or she fails to fully perform their duty. A judge reviews each application to ensure all requirements have been met.
Types of fiduciary bonds include:
- Administration (most common);
- Executor (most common);
- Foreign Executor;
- Guardianship; and
- Trustee in Bankruptcy.
As noted above, administration or executor bonds are the most commonly issued fiduciary bonds. If a court has appointed you to administer the assets of a person who has passed away without a will, you will need an administration bond whereas if you have been appointed to administer the assets of a person who has passed away with a will, you will require an executor bond.
If you live outside the jurisdiction of the court overseeing the estate (e.g. you live in BC, but your mother who passed away lived in Ontario and named you executor), you will need a foreign executor bond. NB: Even though you live in Canada, you will still need a foreign executor bond.
If a person has been declared incapable of managing his or her own affairs due to age, illness or accident and a court or provincial legal body has appointed you to manage the assets of that person, you may need a guardianship bond.
Trustee in bankruptcy bonds are required when you have been appointed by either a judge or creditors. This means you will be acting as a trustee in bankruptcy and/or a negotiator between the debtor (person who owes money) and their creditors. As a trustee in bankruptcy, you act on behalf of the debtor to guarantee the adherence to bankruptcy laws and that the process serves both the creditors’ and the debtor’s interests.