In Ontario, a Probate Bond, also known as a Fiduciary Bond or an Executor Bond, is mandatory for executors where there is no Will and the estate is valued at over $350K. The minimum estate value across other Canadian provinces varies, but the same principle applies.
A Probate Bond is held by the courts and designed to protect assets within the estate and ensure executors act honourably and manage the deceased’s legal and financial affairs in accordance with the law. The bond shields the estate’s beneficiaries and creditors from fraud, negligence, or mismanagement by the appointed executor or administrator.
However, it is not always straightforward to secure a Probate Bond as certain criteria need to be met before issue. Common challenges in securing a bond include:
The applicant is not financially viable
Bonds are granted subject to financial qualification, so in some circumstances are simply not granted. The applicant may have bad credit, be bankrupt, or may have no Canadian assets to secure against the bond.
In addition, insurers require personal indemnity equal to the bond amount. Therefore, an executor must prove their own net wealth is equivalent to the value of the estate of the deceased. This can prove challenging for many people.
Lack of Liquidity in the estate
If the majority of the asses of the executor (indemnitor) are tied up in properties, then it becomes much harder for the insurance company to reclaim any lost funds in the event that there’s a claim on the bond. This means the insurance company may decline a bond submission due to the added complications with selling off property to reclaiming their losses.
Non-resident executors
If an executor is based overseas or out of province, a Foreign Executor Bond may be required. Challenges in securing this type of bond often depend on geography – in other words where the applicant is based and how easy it would be to pursue any financial loss legally.
Beneficiary disputes
Bonds are granted subject to financial qualification and can be expensive. For an estate valued at $1.4million, the bond would cost $45K. If the executor cannot afford this sum or their own net worth is not equal to the value of the estate of the deceased, other beneficiaries can contribute to secure the bond. However, disputes between family members can make reaching an agreement difficult.
Lack of communication
Because evidence of personal wealth is required to secure Probate Bonds, lack of transparency and communication can be a key cause of delays. If the right paperwork is not submitted to prove personal net worth, the application cannot be made and the Probate Bond cannot be granted.
Securing a Probate Bond can be a complicated and challenging process. The best solution is to work with a specialist organisation like Estatesearch, as there are alternative approaches. For example, if the executor’s assets including property, cash and investments, are insufficient, a law firm may step in as guarantor (if professional executor). Joint administrator appointment, corporate trustee, or requesting court waiver with legal argument are also alternatives.
Estatesearch is in partnership with Experia Insurance Group, so our experienced team guide executors to find appropriate solutions and overcome challenges to ensure that the Probate Bonds are granted.