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Fiduciary Bond

A fiduciary is a person who has an obligation to manage assets for the benefit of another. There are many forms of fiduciary duty, such as the holding of funds in escrow by an attorney. In almost all cases, though, fiduciary bonds are issued for court-appointed fiduciaries, such as the executor of a will or estate.

In most states, a court-appointed fiduciary will have to take out a surety bond, though this requirement can be waived by the beneficiary if she is competent to do so. If the fiduciary subsequently fails in his duty to manage assets the best interest of the beneficiary, a claim against the bond can be made to compensate for any losses or damages. The existence of the bond serves to ensure from the outset that the fiduciary is able to pay those damages.

The beneficiary of a fiduciary bond is the person on whose behalf the fiduciary is acting–though in some cases the state may be listed as the beneficiary, allowing the court to determine how to dispense of the proceeds of a claim. The surety (the underwriter who issues the bond) pays out the amount of a claim, if deemed valid by the court, and will then likely seek compensation from the fiduciary.