What Does Fiduciary Bond Mean?
A fiduciary bond is a form of insurance protection ordered by a court to guarantee the faithful performance of a personal representative. Through a fiduciary bond, a bond company contracts to cover the loss whenever a representative, guardian, administrator, executor, or any person in similar capacity commits a mistake or malfeasance and thereby pay the money that would have otherwise be entitled to the ward.
A fiduciary bond is also known as a surety bond, executor’s bond, or administrator’s bond.
Insuranceopedia Explains Fiduciary Bond
If an executor of a will, for instance, decides not to follow the dispositions of the testator, the bonding company will be responsible for the loss incurred by an entitled heir. As this puts a certain degree of risk, bonding companies check the credit standing and background of the representative before issuing the fiduciary bond.
Note, however, that not all guardians are required to produce brands. Personal needs guardians are usually not required to produce a fiduciary bond. Property management guardians and administrators or executors of an estate, on the other hand, are almost always required to post a fiduciary bond.