What You Should Know About Court & Fiduciary Bonds
The purpose of court & fiduciary bonds is to ensure ethical practice and the rule of law. They ensure that court costs are paid on time and that the rights of all parties are protected.
Here are few facts about court & fiduciary bonds:
There are two types of court bonds
Court bonds are broadly split into two types: judiciary bonds and fiduciary bonds. Judiciary bonds are meant to typically protect the interest of either the plaintiff or the defendant. The purpose of the bond is to ensure financial compliance. Fiduciary bonds, on the other hand, impose an ethical obligation by the fiduciary in a case. The purpose of the bond is to see that a court-appointed fiduciary discharges his responsibility in an ethical manner. There is usually no monetary penalty unless the fraudulent actions of the fiduciary caused financial damage to the beneficiaries.
The court bond does not protect you
Many people confuse bonds with insurance. But there is one critical difference. The bond is not meant to protect you, but others from any damage or non-compliance caused by you. For instance, judicial bonds promise that the plaintiff or the defendant will pay the money at the end of the court case. In other words, if you are required to buy the bond, it is effectively a promise that you will pay the other party if the court decides in their favor. Fiduciary bonds are required by the fiduciary and are meant to protect the interests of the beneficiaries.
Court bonds do not follow the usual underwriting process
Surety companies do not follow the usual underwriting process of other surety bonds when it comes to court bonds. They are not concerned about the outcome of the cases or if the plaintiff or the defendant will pay the money at the end of the court case. Rather surety companies evaluate whether the principal can meet their financial obligations concerning the case.
Fiduciary bonds are usually long-term
The fiduciary bond, meant to impose ethical standards for a fiduciary, is usually for the long-term. The bond can stay valid even if renewal premiums are not paid. It usually terminates once the fiduciary gives a complete account to the court. The court will then issue a discharge order. Alternatively, the beneficiaries could also sign a release.