What is an Administration Bond?
An administration bond is personal liability imposed on a prospective estate trustee to protect the interests of the beneficiaries and creditors if the assets are misappropriated. The bond is obtained from a surety (usually an insurance company) and given to the court. The amount of the administration bond that must be posted is usually double the amount of the assets listed in the application for probate.
When is a Bond Required?
Under section 35 of the Estates Act, the court will require a bond to be posted before it will appoint an estate trustee:
- If the executor resides outside of Ontario;
- If a person dies with a Will but neglects to appoint an executor; or
- If a person dies without a Will.
Only in limited circumstances will the court consider a request to waive or reduce this requirement.
Can a Bond be Reduced or Dispensed by Court?
Section 37(2) of the Estates Act provides a judge with the discretion to reduce the amount or dispense with the bond. In the case of Re Estates of Henderson and Zagaglia 2008) the information needed when applying to the court to dispense with the bond requirement:
- the identity of all the beneficiaries;
- the identity of any beneficiary minor or incapable person;
- the value of the interest of any minor or incapable beneficiary;
- signed consents from all beneficiaries to the appointment of the applicant as estate trustee and to an order dispensing with an administration bond;
- the last occupation of the deceased;
- evidence as to whether all the debts of the deceased have been paid, including any obligations under support agreements or orders;
- evidence as to whether the deceased operated a business at the time of death and, if the deceased did, whether any debts of that business have been or may be claimed against the estate, and a description of each debt and its amount; and
- if all the debts of the estate have not been paid, evidence of the value of the assets of the estate, the
particulars of each debt – amount and name of the creditor – and an explanation of what arrangements have been made with those creditors to pay their debts and what security the applicant proposes to put in place in order to protect those creditors.
Essentially, an order to dispense with an administration bond will only be granted if all beneficiaries consent to the proposed order, and if all the debts are paid or the judge is satisfied the creditors will be protected.
Administration bonds can be difficult to obtain, especially when it will take significant time to fully administer an estate or there may be insufficient assets to pay the debts and/or legacies – all the more reason to make a Will and appoint an Estate Trustee who resides in Ontario. For more information about making a Will, see our client information bulletin titled “An Estate Planning Guide.”
We can help.