Estate planning is a complex process involving deciding how you would like the assets distributed after you pass away. Until recently, it has been relatively straightforward: create a will and appoint an executor to ensure your wishes are honored. Recently, however, there has been an emergence of a new option – guardianship bonds – that can be used to ensure that your assets are properly managed and distributed according to your wishes.
What is a Guardianship Bond?
A guardianship bond, also known as a “fiduciary bond” or “administrative bond,” is an agreement between the estate owner and a third-party bonding company (or “surety”) to guarantee the proper management of estate assets. The bond includes provisions that the estate owner creates, such as specifying how the funds are to be handled and distributed, who will manage them, and what happens if there is a dispute over their control or distribution.
Why is Guardianship Bonds Becoming Popular for Estate Planning?
Guardianship bonds are becoming increasingly popular among estate owners due to the extra layer of security they provide. They can help protect against mismanagement and fraud by holding the third-party bonding company liable if something goes wrong or if funds are not handled properly. Additionally, such bonds offer peace of mind by allowing the estate owner to have more control over their assets and the distribution of those assets after they pass away.
How do Guardianship Bonds Work?
A guardianship bond functions similarly to an insurance policy in that it promises to protect the estate owner’s assets in the event of mismanagement or fraud. The third-party surety guarantees protection and, in return, will typically require the estate owner to pay an annual premium or fee. Upon the estate owner’s death, the bond is reviewed by the bonding company to verify that all stipulations of the agreement have been met. If any mismanagement or fraud is detected, then the bonding company will typically reimburse the estate owner’s beneficiaries for any losses.
What are the Benefits of a Guardianship Bond?
Some of the Benefits Include:
Financial Protection: The bond provides financial protection to the ward if the guardian misuses or mismanages the ward’s assets. If this happens, the bond provides a source of compensation for the ward.
Credibility: A guardianship bond is a sign of credibility and responsibility on the part of the guardian. Having a bond in place shows that the guardian is committed to acting in the ward’s best interests and is willing to put up a financial guarantee to prove it.
Compliance with the Law: In some cases, a guardianship bond is required. This helps ensure that all guardians act by legal requirements and are held accountable for their actions.
Is there a Cost Involved with Setting Up a Guardianship Bond?
Yes, there is typically a cost associated with setting up a guardianship bond. The exact cost will depend on the size and complexity of the estate and the type of bonding company chosen. However, many estate owners view this cost as an investment in their financial future, as it can help to ensure that their wishes are followed and their beneficiaries are protected.
Overall, a guardianship bond provides financial protection and helps ensure that the guardian acts responsibly and ethically. It can provide peace of mind to the ward and the ward’s family and may be required by law in some cases.
Ayesha completed her Doctor of Philosophy in Biochemistry and started her career as a College Lecturer in 2013. Today, she’s a happy mom of 2 Kids in the field of digital marketing. She loves reading books, spending time with her family, and making delicious food for her husband.