In probate cases, a Fiduciary Bond (also known as an Estate Bond) protects the assets in the estate and is designed to ensure an executor acts honestly in managing the assets in that estate. Over 30 years ago discussions began and have continued to surround the reform and the challenges and cost associated with applying to the court to dispense with a bond Breaking the Bonds that Bind: The Need to Reform the Bonding Requirements in Ontario’s Estates Act | WEL Partners Blog. However, no such amendments have been made to the existing legislation which states in all intestate applications – where there is no Will – a Fiduciary Bond is required.
Waivers are situational and can be granted if the estate is valued at less than $350K and there is a good relationship between beneficiaries. Small estates can sometimes even bypass probate and funds can be transferred to the beneficiaries.
In most situations where there is a well drafted and recent Will, executors won’t be asked for a Fiduciary Bond.
The challenge is one size never fits all and every situation is different. Further, with the rise of property values – the average property value in Ontario being $450k and over the $350K threshold – the need for Fiduciary Bonds is increasing. This coupled with the fact that online research has revealed 26% of over 55-year-olds in Canada don’t have a Will, means a large proportion of executors will need to obtain a Fiduciary Bond.
However, many executors do not realize they need a Bond at all until they make the necessary applications to court. This therefore can be a shock, as depending on the size of the estate, the bond can be costly. For example, an executor requiring a Fiduciary Bond as an executor on a $1.5 Million estate would need to pay $24k upfront, out of their own pocket, to secure the bond.
This may well be an expense which has never been budgeted for. Although some estates can pay back quicker, with property valuations and sales it may take up to two years – and sometimes longer – for the estate administration and rightful distribution of assets to be completed and those funds recovered.
A further challenge is that some executors fail to qualify for a bond as if they reside in Ontario, they also will need to prove their own net wealth is twice the equivalent size of the estate of the deceased.
Fiduciary Bonds can be a complex topic and best advice is to seek advice. At Estatesearch we specialize in working with executors to find solutions and ensure bonds can be obtained. This may mean identifying other beneficiaries who can co-sign bonds, with their wealth making up the personal wealth allocation difference if there is any shortfall. However, this requires beneficiaries to get along. Although statistics in Canada are difficult to find, we know in the UK for example, there is an increase in contentious probate matters with an estimated one in ten estates ending up in contention so this could also be an issue. Another alternative is for Lawyers to set up trusts or the executor can take out a loan to cover the cost of the bond.
So to answer the question: are Fiduciary Bonds Waivers disappearing in Ontario? The answer is not any time soon but they may become less common as property and estate values continue to rise. Estatesearch is in partnership with Experia Insurance Group so we are here to guide and help to ensure executors can be granted Fiduciary Bonds.