Advantages of Estate Administration Bonds for Law Firms and Lay Executors
Estate Administration Bonds are a complex topic. They’re also seen as another hurdle for executors to overcome during an already lengthy estate administration process, at a time when they are grieving. Yet, with around 34% of estates in Canada involving someone who passes away without a Will, Estate Administration Bonds are mandatory unless the court agrees to waive the requirement.
Why Estate Administration Bonds Matter in Canada
Estate Administration Bonds exist, to protect beneficiaries and creditors and at Estatesure, we’ve handled a wide range of cases, from estates where half the assets were located overseas in countries as far away as Norway, to one where the deceased was the subject of a homicide investigation.
However, one recent matter really highlighted the further benefits of Estate Administration Bonds for both lay executors and the law firms representing them.
A $7 Million Estate and a $14 Million Bond Requirement
The executorship was shared by two brothers, one based in Texas and the other in a different US state. The estate was substantial, with assets totalling approximately $7 million, meaning a bond of around $14 million was required. As foreign executors living in different time zones, and with no Will in place, the brothers’ legal team was struggling to have the bond requirement waived.
The Cost of a Law Firm Acting as Executor
We provided a competitive quote for the bond, but the lawyer decided to take over as executor. While this removed the need for the bond, it also meant the brothers had to pay the law firm directly for its executor services. Over the course of the estate administration, this would have cost them approximately $200,000 more than it would have to secure the bond.
This is where the challenge lies. For both law firms and executors, it can seem like the easier option for the legal firm to assume the role of executor. For family members suffering from the loss of a loved one, it’s one less responsibility to worry about. However, that convenience can come at a cost.
Estate Administration Bonds vs Professional Executor Fees
Typically, the premium for an Estate Administration Bond is around 2% of the estate, while professional executor fees charged by a law firm are often closer to 5%. On larger estates in particular, the difference can be substantial, reducing the value passed on to beneficiaries.
Reducing Risk for Law Firms During Estate Administration
There are also important considerations for law firms. By taking on the role of executor, a firm significantly increases its exposure to personal liability and potential litigation. At a time when many firms are understandably focused on managing and reducing risk, assuming executorship is not always the best option.
On the other hand, using a bond allows law firms to continue acting as trusted legal advisers without taking on the additional responsibilities and liabilities of executorship.
A Faster Approach to Obtaining an Estate Administration Bond
In the past, obtaining an Estate Administration Bond could be a slow process. It was often handled by providers whose primary expertise was construction bonds rather than estate administration, which meant the experience could be frustrating for both executors and their legal advisers.
Helping Family Members Remain as Executors
However, these days specialist providers like Estatesure have changed all that. Estate Administration Bonds are all we do. Once the necessary paperwork has been completed, we can typically secure a bond within a couple of weeks.
A bond can actually enable family members to remain as executors, rather than feeling they have to step aside. The process is quick and more cost-effective for the estate, while also allowing law firms to avoid unnecessary risk.
At Estatesure, we support a quick and easy application process to simplify legal requirements. For information please contact inquiries@www.estatesure.ca
