An advance payment bond provides an estate’s executor or administrator an early release of funds for a specific purpose. The bond guarantees the return of an advance payment if the court later finds the executor or administrator wrongly took the money. The court reviews the estate upon approval of the estate’s final accounting.
Most executors and administrators may request an advance payment to circumvent tax issues, especially if a large estate will make large lump sum distributions in the future.
If the estate’s heirs and beneficiaries agree to allow the executor or administrator to take an advance payment, no need for a bond would arise. However, some beneficiaries may disagree with the advance payment, and some heirs or beneficiaries (such as non-profits) may take too long to respond. Many deceased have Last Wills and Testaments bequeathing gifts to large charities and non-profits.
Typically, the executor or administrator pays the bond premium out of his own pocket. Furthermore, the bond does not renew. Premiums may equal a percentage of the bond amount, and the bond amount equals the size of the advance payment. These bonds differ from regular administration and executor bonds, which typically allow for the executor or administrator to pay the bond premium with estate funds. Administration and executor bonds also renew yearly and the premiums follow a rate schedule based on the bond amount.
To underwrite these bonds, surety underwriters look at an applicant’s credit and regard the quality of the applicant’s legal counsel. An executor or administrator must petition the court to receive a decree awarding the advance payment. Therefore, sureties expert legal counsel’s involvement throughout the whole process to avoid the pitfalls of the legal system and prevent claims. Good legal counsel may protect the surety in the event of a claim as well. Our office can easily secure most advance payment bonds.