Guardianship bonds, sometimes also referred to as a custodian, trustee or conservatorship bond, are a type among the general classification of court bonds and are a requirement of courts in situations where some person has been appointed as the representative of another individual. This representative is generally put in charge of finances, as well as other matters, and carries out these duties on behalf of someone who is usually unable to do it for themselves, for instance, a senior, minor, or someone who is disabled.
The bond works as a kind of guarantee that the guardian representative will carry out assigned tasks in a manner consistent with the best interests of the person they are representing. If mismanagement or any other form of abuse should occur during the execution of these tasks, a claim can be filed against the bond, so that the protected person suffers no financial damage.
How do guardianship bonds work?
Just like all other surety bonds, there are three parties to the contractual agreement, which is made up in the case of a conservatorship bond (or guardian bond). The first of these three parties is the surety company, which provides the bond and acts as a guarantor of legal compliance on the part of the guardian. The individual who acts as guardian of the ward of the court is known legally as the principal, and the obligee is the body of the court itself, which requires the bond upon the principal.
In the event that the guardian somehow misrepresents the ward of the court, or acts in a manner that is construed to not be in the best interest of that ward, especially if illegal acts are involved, there is a possibility for the ward and their representatives to make a claim against the guardianship bond to recover the amount of any losses sustained.
Assuming the claim was found to be valid, the bonding company would then be obliged to pay out a sum of money to the ward to cover any financial losses the ward may have incurred. In most cases, the company would then be free to pursue the principal to attempt to recover that same sum of money.
Who needs a bond for guardianship?
A guardianship bond is usually needed by anyone who is representing or caring for a minor, or someone who is disabled or otherwise unable to carry out their affairs. While courts do not insist that a guardianship bond be purchased in all cases, it will require a bond when it is clear that a significant amount of money or general estate assets are at stake, and there is at least some possibility of misrepresentation on the part of an appointed guardian.
Are there different types conservatorship bonds?
Not really. They are an individual example of the broader category of fiduciary bonds, as are trustee, probate, estate and executor bonds. All of these act in virtually the same way, even though the terminology associated with each may be different. Fiduciaries who are appointed by the court for various roles such as guardians, executors, or trustees are the principals involved in all kinds of fiduciary bonds, including conservatorship.
As such, their roles are largely the same across all these assigned duties, i.e. they have been appointed by the court to act on behalf of an incapacitated person, to carry out some specific task that the disabled individual is unable to perform for themselves. It is often a requirement of the court for any of these fiduciaries to make regular reports on the progress of their assigned duties, so that a court may be confident of their compliance.
How much do they cost?
The cost of any guardianship bond is always some percentage of the face value of the bond itself, which is imposed by a court, and is referred to as the premium. The actual amount of the bond is a calculation made by a court and is based primarily on the total finances and assets owned by the ward. The amount is deemed to be an appropriate level of protection which is commensurate with the total value of those assets.
Courts sometimes use an alternative method of calculating the premium, if it deems some other approach is more appropriate to the circumstances of the case. The cost of a bond to a principal purchasing one will largely be dependent on the buyer’s credit score and overall financial stability, usually a figure between 1 percent and 3 percent of the bond’s premium. For extremely high bond premium amounts, the cost to a principal generally decreases and is commonly less than 1 percent of the total amount of the surety.
How do I get a guardianship bond?
The process for obtaining a guardianship bond is fairly simple, especially if you have a good credit history and are deemed to be financially stable as an applicant. The first step in obtaining a custodial bond is to choose a bonding company from which you will purchase a bond. A good choice in this regard would be NFP, one of the country’s largest and most reliable such companies that is authorized to sell guardianship bonds in every state.
If you happen to have credit challenges, it will be a judgment call on the part of the bonding company whether or not they choose to issue one to you. This is always an important consideration for the company because it must weigh the possibility of a principal defaulting if any claim were to be made against a bond, in which case it would then become fully liable for the amount of the claim. NFP will make every attempt to get you bonded, regardless of your credit situation.
After applying online, by phone, or through the mail, you will receive an indemnity agreement from the company, which must be signed in the presence of a notary public and returned with the fee for the bond. Once the company receives the signed indemnity agreement and premium, the bond goes into effect.
If you want to learn more, or if you have any questions about bond or the bonding process, please contact us.