The Probate Code requires that any guardian post a “bond” to insure their faithful performance of their duties as the guardian. While this requirement extends to guardians of the person, it is generally a much bigger concern for guardians of the estate. As a guardian you should consult with an experienced guardianship lawyer in Texas to do this.
A bond is essentially an insurance policy that is posted by the guardian to insure that the estate will be reimbursed if the guardian stole assets of the estate, misappropriated them in some manner, or negligently lost the assets. The bond must cover the liquid assets of the estate (everything other than real estate) plus any income anticipated for the year, because these are the assets that the guardian could potentially steal or lose.
Example: Leeland McKenzie is 89 years old and has just been placed under a guardianship. His son, Douglas, has been appointed as his guardian of his father, his father’s house valued at $140,000 and his father’s bank account valued at $183,000.00. Mr. McKenzie has annual income from social security and his pension of $27,000.00.
In this Example, the guardian Douglas would be required to post a bond covering the $183,000 bank account and the $27,000 in annual income, which totals a bond amount of $210,000.00.
Many times, clients are concerned that they are going to be required to pay the bond amount or put up some kind of collateral to secure the bond. Generally, this is not the case. Rather, the bond is taken out through a bonding company, similar to an insurance company. Just like you would pay an annual premium on a homeowners insurance policy, the guardian likewise pays an annual premium on a guardianship bond.
As with other types of insurance, the bond process is essentially a function of someone’s credit worthiness. The bond company will look at the proposed guardian’s credit history, personal assets, personal debts, etc. in making the determination as to whether they will insure the guardian.
Because the bond premium is an expense of the guardianship estate, the guardian is entitled to be reimbursed for the bond premium out of the Ward’s estate. As a result, the guardian is not required to incur this expense personally.
An important note about the bonds in a guardianship proceeding: payment of the bond premium is an element required for a guardian to be qualified to serve as the guardian. Until the bond premium has been paid, the proposed guardian will not have any authority to act on behalf of the Ward. If a proposed guardian has questionable credit and may not be able to qualify for a bond, they should discuss this with their guardianship lawyer so that the issue can be addressed before the Court has acted and is waiting for the bond premium to be paid.
Ford+Bergner LLP works frequently with proposed guardians in solving their bond issues. If you have a question related to this topic, please do not hesitate to Contact Us.