Montana Personal Representative Bond: A Comprehensive Guide
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: Certain personal representatives handling the estates of deceased Montana 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 Montana: The district court of the county where the deceased individual resided or had property
Background
Montana statute 72-3-103 requires all personal representatives of an estate to be appointed by a court before assuming their fiduciary duties. The Montana 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 Montana Personal Representative Bond?
Montana 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 Montana Statute 72-3-516. Specifically, the bond protects beneficiaries and creditors if the personal representative engages in any acts of fraud or mismanages the estate’s assets. 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 a Montana Personal Representative Surety Bond?
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How is the Bond Amount Determined?
Montana Statute 72-3-515 dictates that the bond must be equal to the amount specified in the deceased individual’s will. If no amount was mentioned in the will, then the bond must be equal to the personal representative’s best estimate of the personal value of the estate plus the estimated income the estate, including all real estate, will generate in the next year. The bond may be reduced by the amount of the estate’s assets deposited with a domestic financial institution that prohibits their unauthorized disposition.
What are the Underwriting Requirements for the Montana Personal Representative Bond?
Most surety companies will examine the following factors when determining eligibility for the Montana 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 Montana 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 Montana Personal Representative bond:
$1,500,000 Personal Representative Bond Cost
| Bond Amount | Premium Rate | Total Bond Cost |
|---|---|---|
| First $20,000 | 0.75% | $150 |
| Next $40,000 | 0.60% | $240 |
| Next $140,000 | 0.50% | $700 |
| Next $300,000 | 0.375% | $1,125 |
| Next $1,000,000 | 0.25% | $2,500 |
| Total cost of $4,715 |
Who is Required to Purchase the Montana Personal Representative Bond?
Personal representatives will typically not need to purchase a bond during informal estate proceedings except in the following situations:
- They are a special administrator
- The will requests a bond be obtained
- Any interested person or creditor entitled to $5,000 or more of the estate petitions the court to require one
The court may require a personal representative to purchase a bond at any point during formal estate proceedings. However, personal representatives are exempt from purchasing a bond during formal proceedings if the will explicitly waives the bond requirement, unless an interested person requests one be obtained. Any interested person, including the personal representative, may petition the court to excuse the bond requirement.
To paraphrase Montana Statute 72-1-103, 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 (testate), and administrators if they were not nominated if no will exists (intestate). Additionally, a special personal representative is someone temporarily appointed to administer the estate while a general personal representative is in the process of being appointed.
How do Personal Representatives Become Appointed in Montana?
Personal representatives in Montana must navigate several steps to become court-appointed fiduciaries. Below are the general guidelines, but applicants should refer to Montana’s probate statutes and the probate section of the state judicial branch’s website for details on the process.
Step 1 – Meet the Qualifications
Personal representatives are ineligible for appointment if they are:
-
- Under the age of 18
- Deemed unsuitable by the court
Step 2 – Determine Priority
Priority for appointment as a personal representative shall be granted in the following order:
-
- Persons nominated in the will or by a person the will grants nominating power to
- The surviving spouse, provided they are a devisee of the estate (entitled to real estate)
- The custodial parent (if the deceased individual is a minor)
- Any other devisee
- The surviving spouse
- The parents of the deceased individual, provided the deceased individual is an adult and is survived by minors
- Any other heir
- A public administrator
- Any creditor, provided the deceased individual has been dead for at least 45 days
If an objection to the appointment of a specific personal representative is made in a formal proceeding, then the order of priority outlined above still stands, except in the following situations:
-
- The court may appoint any qualified person if the estate seems capable of meeting exemptions and costs of administration but incapable of discharging unsecured claims and any creditor petitions them to do so
- If any estate beneficiary objects to an appointment (other than for a person nominated in the will) the court may appoint a person that is acceptable to all devisees and is entitled to more than half the distributable value of the estate, or in the absence of such a person, any 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 – Determine the Estate Administration Type
Montana has four distinct processes for administering estates, as outlined below:
-
- Summary Administration: Persons entitled to all or some of an estate whose value (minus liens and encumbrances) does not exceed $50,000 may collect their owed property by filing an affidavit with the court. Summary administration is not available if a personal representative has been appointed or if an application for appointment has been filed.
- Informal Probate: Personal representatives may administer the estate with minimal court supervision. Unless the estate qualifies for summary administration, this is the default estate administration type.
- Formal Testacy: Litigation to determine the validity of a will and/or the appointment of a personal representative. Formal testacy is initiated when any interested person files a petition objecting to the validity of a will or a personal representative’s appointment
- Supervised Administration: The personal representative is closely monitored by the court when administering the estate. Any interested person, including the personal representative, may file a petition with the court requesting supervised administration.
Step 5 – Contact the Court
Personal representatives must contact the district court of the county 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.
Step 6 – Purchase a Surety Bond
Unless otherwise exempt, personal representatives must purchase and maintain a surety bond (limits outlined above).
How do Montana Personal Representatives File Their Bonds?
Personal representatives should submit their completed bond forms, including the power of attorney, to the probate court 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:
- Court where the bond will be filed
- Name of the 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
What can Montana Personal Representatives do to Avoid Claims Made Against Their Bonds?
To avoid claims against their bonds, personal representatives in Montana must ensure that they:
- Do not engage in any acts of fraud
- Do not mismanage the estate’s assets
- Fulfill their fiduciary duties