Administration bond, what on earth is that? Well, as we’ve talked about before, someone either has a will or they don’t have a will. If they don’t have a will, then they die intestate. When someone dies intestate, their estate gets distributed in accordance with the formula. Generally, spouse, children, parents and so on.
When there’s a class of beneficiaries such as children, there is no allocated executor or administrator to administer that estate. One of those class of people such as children has to step up and become the administrator. Let’s say there’s seven children that are the beneficiaries of a parent’s estate under intestacy. It would be very impractical for all seven of those children to be the administrator. Too many cooks as you can imagine. Generally, it’d be best if there’s one person who can step up and take the role. However, that is a great responsibility being the administrator because they have all the assets and can pretty much have the power to do whatever they want with it, such as get the money in and abscond overseas.
Where there’s a collection of multiple beneficiaries, the court requires what’s known as an administration bond, like an insurance policy to all the other beneficiaries that the administrator isn’t going to maladminister, rip off, do it wrong and they lose out. Let’s say in a situation there’s seven children and there’s an estate of $700,000 and there’s one person who wants to be the administrator. The court will require an administration bond for that entire sum, $700,000, which is generally given by a surety, an insurance company or a bank who can back that amount of money.
If the administrator serves notice on all those beneficiaries, generally, the court will waive or dispense with the administration bond. Meaning everyone has notice that this person is applying to be the administrator, they have an opportunity to come forth and dispute that application. Or if there’s a minor and they have a legal guardian and that guardian gives their consent that the applicant administrator is okay, then the court will dispense with the administration bond.
An instance where it wouldn’t be dispensed with is where one of the beneficiaries disputes that applicant administrator being the administrator. Then the court would generally require that the bond be put in place. That’s administration bonds.
Hope that’s been of interest to you. Talk again next time.