New York Administration 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 executors and administrators handling the estates of deceased New York residents or property owners
- Purpose: To ensure estate beneficiaries and creditors receive compensation if the personal representative fails to fulfill their fiduciary duties
- Who Regulates Personal Representatives in New York: The surrogate court of the county with jurisdiction over where the deceased individual resided or had property
New York Statute Chapter 59A Article 7 requires all executors and administrators of estates to be appointed by a court before assuming their fiduciary duties. The New York legislature enacted the appointment requirement to ensure that executors and administrators do not mismanage the estate’s assets. To provide financial security for the enforcement of this requirement, the court may require the executor or administrator to purchase a probate surety bond to be eligible for appointment.
What is the Purpose of the New York Administration Bond?
New York requires executors and administrators 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 executor/administrator fails to abide by the regulations outlined in New York Statute 801. Specifically, the bond protects beneficiaries and creditors if the executor/administrator commits fraud or fails to properly administer the estate. In short, the bond is a type of insurance that protects the estate’s beneficiaries and creditors if the executor or administrator violates their fiduciary duties.
How Can an Insurance Agent Obtain a New York Administration Surety Bond?
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How is the Bond Amount Determined?
New York Statute 801 dictates that the bond amount must not be less than the value of the estate’s personal property (that the executor/administrator has access to) plus the estimated gross rents to be generated by the estate over the next 18 months (that the executor/administrator has access to). The bond amount may be reduced by the value of the estate’s assets deposited with a fiscal officer, clerk of court, bank, or trust company. The court may at any time increase or reduce the required bond amount if a good reason for doing so is shown.
What are the Underwriting Requirements for the New York Administration Bond?
Most surety companies will examine the following factors when determining eligibility for the New York Administration bond:
- Fiduciary’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 executor/administrator is replacing a prior fiduciary
- If the fiduciary 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 New York Administration Bond Cost?
Surety companies typically determine the premium rate for administration 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 New York Administration bond:
$1,500,000 Administration Bond Cost
|Bond Amount||Premium Rate||Total Bond Cost|
|Total cost of $4,715|
Who is Required to Purchase the New York Administration Bond?
Executors in New York are typically not required to purchase a bond unless the will explicitly requires one, the court determines one is necessary, or a person with an interest in the estate petitions the court to require one. Administrators must always obtain a bond, except in the following situations:
- All estate beneficiaries agree to waive the bond requirement
- The court determines that a bond is unnecessary
To paraphrase New York Statute 103, an executor is a person nominated in the deceased individual’s will to administer their estate. Likewise, an administrator is responsible for administering the estate of a deceased individual who either did not nominate them in their will or died without one.
How do Executors and Administrators Become Appointed in New York?
Executors and administrators in New York must navigate several steps to become court-appointed fiduciaries. Below are the general guidelines, but applicants should refer to New York’s probate statutes (see here and here) and the state’s probate page for details on the process.
Step 1 – Meet the Qualifications
Executors and administrators are ineligible for appointment if they are:
- An infant
- Deemed incompetent or ineligible by the court
- A non-domiciliary (their home is not in the US) noncitizen, unless:
- They are an authorized foreign guardian
- They serve with one or more co-fiduciaries
Step 2 – Determine Priority
Priority to serve as a personal representative shall be granted in the following order:
- Surviving spouse
- Deceased individual’s children
- Any other distributee (entitled to the estate’s property)
- Public administrator or chief fiscal officer of the county
- Any other qualified person
Step 3 – Hire an Attorney
Although not explicitly required, it is highly recommended that executors and administrators hire an attorney to assist with the probate process.
Step 4 – Contact the Court
Executors and administrators must contact the surrogate court of the county with jurisdiction over the deceased individual’s estate. A representative of the court will walk the executor/administrator through the appointment process, provide them with all required forms, and answer any questions they may have.
If the deceased individual left a will, the court will hold a hearing to determine its validity. Estates worth less than $50,000 can be settled via a Voluntary Administration proceeding and do not have to go through a formal probate process. Additionally, any interested person may object to the executor or administrator’s appointment.
Step 5 – Purchase a Surety Bond
Unless otherwise exempt, executors and administrators must purchase and maintain a surety bond (limits outlined above).
How do New York Executors and Administrators File Their Bonds?
Executors and administrators should submit their completed bond forms, including the power of attorney, to the surrogate court with jurisdiction over the estate.
The surety bond requires signatures, including witness signatures, from the company that issues the bond and the executor/administrator. The surety company should include the following information on the bond form:
- Legal name of the entity/individual(s) buying the bond
- Surety company’s name and address
- Court where the bond is to be filed
- Bond amount
- Date the bond is signed
- Name of the deceased individual
What can New York Executors and Administrators do to Avoid Claims Made Against Their Bonds?
To avoid claims against their bonds, executors and administrators in New York must ensure that they:
- Properly distribute the estate’s assets
- Do not commit fraud
- Fulfill their fiduciary duties