The Purpose of the Administration Bond

by Investing School on June 13, 2012

When you set up an estate you must pick someone to be your administrator. The administration bond is posted on behalf of the administrator to assure that said administrator will conduct their duties according to the stipulations of the will and any legal requirements of the jurisdiction. The bond is used to cover any losses caused to the estate as a result of any dishonest or improper acts conducted by the administrator.

Typically one appoints an executor to handle the affairs of an estate. However, some estates require an administrator instead. If the estate has a will in place but lacks an executor or the executor has already died, been removed or declined to fulfill their duties an administrator will be appointed. An administrator may be appointed by the court or by the law firm which represents the estate.

The goal behind the administration bond is to provide incentive for the administrator to carry out their duties appropriately. Any inappropriate acts will result in a financial loss to the administrator, not just the estate. The bond is posted by the executor, in the case that one exists, or the designated administrator.

The amount of the administration bond will depend upon many factors, the size of the estate being the primary consideration. Rules and premiums vary from state to state, according to information found online. An administrator bond may also be referred to as an Executor Bond or Personal Representative bond. As is the case with other bonds, an administrator can post a bond by paying a premium as a loan for the total amount.

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