What are Probate Bonds?
A probate bond is a bond issued to protect the heirs and creditors of an estate from the negligence or dishonesty of a personal representative. A personal representative may have sloppy bookkeeping or does not properly and timely deal with claims of the estate. Less often, the personal representative may act dishonestly and steal the assets or gamble them away. In these situations a bond will protect the heirs and creditors from the loss.
When are Probate Bonds Required in Oregon?
ORS 113.105 describes the necessity and amount of bond. Generally speaking, if a will says that no bond shall be required or if the personal representative is the sole heir or devisee no bond will be required.
If the will requires a bond, or doesn't mention bonding, or if the person died without a will and has multiple heirs, the court will require that a bond be filed with the court before letters of administration or testamentary are issued.
The court also has discretion to require a bond even if the will says no bond is necessary.
How Large of a Probate Bond will be Required?
The court looks at three things in order to determine the amount of bond:
- The nature, liquidity and apparent value of the assets of the estate.
- The anticipated income during administration.
- The probable indebtedness and taxes.
The court is required by statute to ensure that the bond is adequate to protect interested persons of the estate.
Qualifying for a Bond.
The bond will be issued to the personal representative by a surety company authorized to transact surety business in this state. The surety company will look at the personal representatives credit report and assets when deciding the amount the personal representative qualifies for.
If the personal representative doesn't qualify for bond required by the court, other options have to be explored.
- Finding a personal representative that does qualify for the bond. This can be done by having the personal representative nominated in the will or preferred by statute decline to serve.
- Restricting estate assets. Typically the real estate (houses) of the deceased are listed as restricted in the petition. This restriction prevents the real estate from being sold without a court order. Because real estate is usually the largest asset of the estate, this will reduce the bond greatly.
- Waiver of Bond by interested parties. The court may, in its discretion, "waive the requirement of a bond if all devisees and heirs known to the court agree in writing that the requirement be waived and the signed agreement is filed with the court at the time of filing of the petition for the appointment of a personal representative." ORS 113.105(4)
If you have any additional questions regarding bonding or probate in general, search the blog in the box on the right or feel free to contact me.