Alabama Personal Representative Bond: A Comprehensive Guide
October 6, 2022
This guide provides information for insurance agents to help their customers obtain an Alabama Personal Representative bond.
At a Glance:
- Average Cost: Calculated based on a tiered structure
- Bond Amount: Determined on a case-by-case basis (more on this later)
- Who Needs it: Most personal representatives handling the estates of deceased Alabama residents or property owners
- Purpose: To ensure estate beneficiaries and creditors receive compensation if the personal representative mishandles the estate’s assets
- Who Regulates Personal Representatives in Alabama: The probate court of the county with jurisdiction over where the deceased individual resided or had property
Alabama Statutes 43-2-20 and 43-2-40 require all executors and administrators (personal representatives) of an estate to be appointed by a court before assuming their fiduciary duties. The Alabama legislature enacted the appointment requirement to ensure that personal representatives do not mismanage the estate’s assets. To provide financial security for the enforcement of this requirement, the court may require the personal representative to purchase a probate surety bond to be eligible for appointment.
What is the Purpose of the Alabama Personal Representative Bond?
Alabama requires personal representatives to purchase a surety bond as a prerequisite to being appointed as a fiduciary over an estate’s assets. The bond ensures that the estate’s beneficiaries and creditors will receive compensation for financial harm if the personal representative fails to abide by the regulations outlined in Alabama Statute 43-2-851. Specifically, the bond protects beneficiaries and creditors if the personal representative mismanages the estate’s assets or fails to submit accurate reports to the probate court. In short, the bond is a type of insurance that protects the estate’s beneficiaries and creditors if the personal representative violates their fiduciary duties.
How Can an Insurance Agent Obtain an Alabama Personal Representative Surety Bond?
BondExchange makes obtaining an Alabama Personal Representative bond easy. Simply login to your account and use our keyword search to find the “Probate” bond in our database. Don’t have a login? Enroll now and let us help you satisfy your customers’ needs. Our friendly underwriting staff is available by phone (800) 438-1162, email or chat from 7:30 AM to 7:00 PM EST to assist you.
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How is the Bond Amount Determined?
Alabama Statute 43-2-851 dictates that the bond amount must be equal to the full value of the estate’s assets controlled by the personal representative as well as the estimated income the estate will generate in the next year. The bond amount may be reduced by the value of all personal and real property the personal representative cannot sell or take possession of without a court order.
The court may increase and reduce the required bond amount as they see fit. Additionally, personal representatives may petition the court to reduce their bond amount after paying out a partial settlement under the estate.
What are the Underwriting Requirements for the Alabama Personal Representative Bond?
Most surety companies will examine the following factors when determining eligibility for the Alabama Personal Representative bond:
- Personal representative’s credit history (not considered for bonds with limits less than $25,000)
- Whether or not the estate has an attorney (not considered for bonds with limits less than $25,000)
- How long the fiduciary appointment is for
- Whether or not the personal representative is replacing a prior fiduciary
- If the personal representative has ever committed a felony
- If there are disputes among the estate’s beneficiaries
- Whether or not there is any ongoing business in the estate
- If the bond is being required by a creditor
How Much Does the Alabama Personal Representative Bond Cost?
Surety companies typically determine the premium rate for personal representative bonds based on a tiered structure. As a result, larger bond amounts will be charged a lower premium rate than smaller bonds.
The following table illustrates the pricing structure for the Alabama Personal Representative bond:
$1,500,000 Personal Representative Bond Cost
|Bond Amount||Premium Rate||Total Bond Cost|
|Total cost of $4,715|
Who is Required to Purchase the Alabama Personal Representative Bond?
Alabama requires personal representatives to purchase a surety bond as a prerequisite to obtaining a fiduciary appointment. To paraphrase Alabama Statute 43-8-1, a personal representative is a court-appointed fiduciary responsible for administering a deceased individual’s estate. Personal representatives are referred to as executors if the deceased individual nominated them in their will, or administrators if they were not nominated in the will or if no will exists.
Personal representatives are not required to purchase a bond if the deceased individual’s will explicitly waives the bond requirement, unless:
- The personal representative files an affidavit saying their interest in the estate will be endangered if no security is filed
- The court determines a bond is necessary
How do Personal Representatives Become Appointed in Alabama?
Personal representatives in Alabama must navigate several steps to become court-appointed fiduciaries. Below are the general guidelines, but applicants should refer to Alabama’s probate statutes for details on the process.
Step 1 – Meet the Qualifications
Persons are ineligible for appointment as a personal representative if they:
- Are under the age of 19
- Have been convicted of an infamous crime
- Are deemed incompetent
- Are not a resident of Alabama (unless they are currently the executor of the same estate in another state)
Step 2 – Determine Priority
Priority to serve as a personal representative shall be granted in the following order:
- Persons nominated in the will
- The surviving spouse
- Any next of kin entitled to some or all of the estate’s assets
- The deceased individual’s largest creditor residing in Alabama
- Any other qualified person
Step 3 – Hire an Attorney
Although not explicitly required, it is highly recommended that personal representatives hire an attorney to assist with the probate process.
Step 4 – Contact the Court
Qualified persons with priority must contact the probate court of the county court with jurisdiction over the deceased individual’s estate. A representative of the court will walk the personal representative through the appointment process, provide them with all required forms, and answer any questions they may have. The court will appoint the personal representative after examining their petition.
Step 5 – Purchase a Surety Bond
Unless otherwise exempt, personal representatives must purchase and maintain a surety bond (limits outlined above).
How do Alabama Personal Representatives File Their Bonds?
Personal representatives should submit their completed bond forms, including the power of attorney, to the probate court of the county with jurisdiction over the estate.
The surety bond requires signatures from the company that issues the bond and the personal representative. The surety company should include the following information on the bond form:
- Name of deceased individual
- Date the bond goes into effect
- Legal name of the entity/individual(s) buying the bond
- Surety company’s name
- Bond amount
- Date the bond is signed
- Date the fiduciary appointment was made
What can Alabama Personal Representatives do to Avoid Claims Made Against Their Bonds?
To avoid claims against their bonds, personal representatives in Alabama must ensure that they:
- Do not mismanage the estate’s assets
- Fulfill their fiduciary duties