WHAT IS PROBATE BOND PURPOSE
The basic statutory authority governing bonds in probate proceedings is set forth in Probate code 8480-8488
The purpose of the probate bond is to ensure that the personal representative faithfully carries out his or her fiduciary duties. The bond protects the state, heirs, beneficiaries, and creditors by giving them security in the form of a promise by the surety to cover any court-ordered surcharge against the personal representative for the representative’s breach of trust. The bond, having been signed by the representative and the surety, makes both the representative and the surety jointly and severally liable on it.
What is probate bond and When it Required
Every person appointed as a personal representative must give a bond approved by the court before letters are issued, except as otherwise provided by statute probate Code 8480 (a). If there is more than one personal representative, the court may require either that each file a separate bond (each of which must be in the full amount required by or that all file a joint and several bond.
When a bond is required by the terms of a will, it cannot be waived. Situations in which a bond may be required include the following:
What is probate bond requirements with two or more personal representatives?
If the will nominates two or more people to serve as executors without bond but not all those nominated serve, and the will does not specifically waive bond for fewer than the number specified, each executor must give a bond unless all beneficiaries waive bond.
What is probate bond requirements with the administrator with will annexed? Similarly, if all executors nominated by the testator and for whom the testator waived bond fail to qualify, the administrator with will annexed must post bond.
Individual cofiduciary. When a corporation and an individual are cofiduciaries, an individual cofiduciary who is required to give a bond must give a separate bond, unless the estate assets are held solely by the corporate fiduciary.
What is probate bond requirements with a nonresident representative? A nonresident representative almost always, and in some counties always, is required by local court rules to file a bond. Practitioners should carefully review local rules to determine if additional allegations and pleadings are required when requesting a bond waiver for a nonresident representative.
Court’s discretion. Even when the will waives a bond or all beneficiary’s consent, there are circumstances, such as the appointment of a special administrator, in which the court may require a bond. Counsel should always consider filing an additional declaration supporting a request to waive a bond.
Attorney representative. In some counties, a bond may be required whenever an attorney serves as executor. Even if not required, an attorney serving as a personal representative should consider posting a bond, but should make sure to consult local probate rules.
Special administrator. A special administrator, like a general personal representative, must give the bond required of administrators (unless the public administrator has been appointed). ). Many courts require a special administrator to post a bond even if the will waives the bond.
What is probate bond flexible requirements?
A bond might not be required in the following situations:
The will waives bond. (person named as executor in will is appointed special administrator). However, even if the will waives bond, the court may require a bond in the following circumstances:
On its own motion or on the petition of an interested person, for good cause.
If the proposed representative resides outside California or for other good cause.
All beneficiaries waive bond in writing and the will did not require bond or there is no will. The Waiver of Bond by Heir or Beneficiary (Judicial Council Form DE-142/DE-111(A-3d)) must be filed with the petition for probate if the personal representative is seeking a bond waiver.
Bond also is not required of the following entities who are appointed as the personal representative:
Public administrator. A public administrator must file a bond as a public officer and is not compelled to file a separate bond as personal representative. The official bond stands in lieu of the representative’s bond. The estate is charged an annual bond fee of $25 plus 0.25 percent of the amount of an estate greater than $10,000.
Trust company. A personal representative that is a corporation or association authorized to conduct the business of a trust company qualified to do business in California cannot be required to give a bond. To qualify as a trust company in California, the applicant must deposit with the California State Treasurer money or securities in an amount that varies under certain defined circumstances.
What is probate bond alternative?
When an estate contains property of large value, bond premiums are substantial. The premium can be reduced by depositing some or all of the property in a “blocked account” Withdrawals from a blocked account must be authorized by the court. The representative is discharged from further responsibility for that property until it is withdrawn for factors to consider in deciding whether to deposit assets.
A rarely used alternative to a blocked account is a deposit of assets with the court clerk. If the representative knows that it is preferable to deposit assets into a blocked account or with the court clerk instead of executing a bond or as a means of reducing the amount of bond, the petition seeking appointment should include a corresponding request and the order appointing the representative should authorize him or her to make the deposit. Note, however, that deposits can be made even before the representative has qualified to act as the personal representative of the estate.
Impact of Prenuptial and Postnuptial Agreements
A prenuptial or postnuptial agreement can significantly alter how property, including property owned before marriage, is treated in California. If a couple has a valid agreement in place, it may override the default community property rules, determining whether the non-owning spouse has a right to a portion of the property or its appreciation, even if mortgage payments or improvements were made with community funds.
For example, a prenuptial agreement might specify that any property owned before marriage remains the separate property of the owning spouse, regardless of any community contributions. It could also address the appreciation in value, explicitly granting the non-owning spouse a share of the increase, even without a community contribution to the mortgage.
Tracing Separate and Community Funds
In California, to determine the proportion of the property that is separate versus community property, tracing is a key process. If separate property funds were used for mortgage payments or improvements, the spouse contributing those funds may retain a larger portion of the property.
Courts allow tracing through financial records, such as bank statements or receipts, to ensure the accurate division of property. This can get complicated if both community and separate funds were intermingled, but tracing allows for a fair allocation of ownership interests.
Considerations for Homes Purchased Before Marriage by Both Spouses
When a couple purchases a home together before marriage, it creates a situation where ownership and contributions need careful evaluation:
- Mortgage Payments: Payments made during the period before marriage may still be considered as community property contributions if both parties’ income was used for the payments.
- Equity Division: Even if only one spouse is on the title, the non-owning spouse may have a claim to a share of the equity, particularly if they contributed to the mortgage payments or improvements. This claim may require legal action or a negotiated settlement.
- Co-Habitation Agreement: If the couple is not married, having a cohabitation agreement in place can help outline the ownership percentages and rights related to the home and mortgage. This is especially important to protect the non-owning spouse’s interests if the relationship ends.
Tax Considerations and Property Ownership
Tax benefits associated with owning property are different for married and unmarried couples. For married couples, there are potential tax advantages, such as the ability to file jointly and take full deductions on mortgage interest and property taxes. If a couple is unmarried but owns property together, they will not have access to these same tax benefits unless specific legal steps, such as cohabitation agreements or joint ownership, are taken.
If one spouse owns the home before marriage, they can continue to claim property tax deductions and mortgage interest. However, if community funds have been used for the mortgage, the non-owning spouse may have a claim to part of those tax benefits as well.
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