A court-appointed trustee or a trustee under a testamentary trust often must post a bond securing faithful performance of the trustee's fiduciary duties — protecting the trust beneficiaries against misappropriation, mismanagement, or breach of duty. We write trustee bonds in every state and for every type of court-supervised trust: testamentary, charitable, supervised inter vivos, special needs, spendthrift, court-created trusts arising from settlement proceeds.
A trustee holds property — money, real estate, securities, businesses, intellectual property — for the benefit of someone else. The beneficiary may be a minor child, an incapacitated adult, a charity, or any class of persons named in a trust instrument. The trustee owes the beneficiaries a fiduciary duty of the highest order: to invest prudently, distribute according to the trust terms, avoid self-dealing, account periodically. The trustee bond is the financial guarantee that the trustee will perform those duties; if the trustee defaults — misappropriation, negligent investment, breach of accounting duty — the bond pays the beneficiaries up to the bond limit.
Trustee bonds arise in three common contexts. Testamentary trusts created by will often require the testamentary trustee to post a bond, unless the will explicitly waives the bond requirement. Court-supervised inter vivos trusts — including most charitable trusts, special needs trusts, settlement trusts for personal injury minors, and conservatorship-related trusts — require the trustee to post bond as a matter of statutory or court-ordered requirement. Successor trustees taking over from a prior trustee may be required to post bond even if the original trustee was bond-waived.
The bond does not insure the trust's investment performance. A trustee who invests prudently and loses money in a market downturn has not breached duty. The bond protects against misfeasance and malfeasance — taking trust funds for personal use, paying improper distributions, failing to account, self-dealing in trust assets — not against ordinary investment risk.
Trustee bond requirements are state-specific. Most states have codified their trust law as a Uniform Trust Code variant. The Uniform Trust Code (UTC §§702-703) addresses trustee bonding: bond is required if the trust instrument requires it, if a beneficiary demands it, or if the court finds it necessary. Most states adopting the UTC follow this framework with state-specific variations.
For court-supervised trusts arising from probate proceedings, the state's probate code typically governs — most state probate codes require trustee bonds at full corpus value plus one year of projected income, unless the will waives or the court reduces the requirement.
Trustee bond underwriting is similar to probate bond underwriting but with additional attention to the duration of the trust and the trustee's investment authority. A 21-year minor's settlement trust requires different underwriting than a 90-day litigation escrow trust. Most trustee bonds are written on standard application terms without collateral, with premium reimbursable from trust funds as a recognized administration expense.
Three documents start the file: the trust instrument or court order creating the trust, an inventory of trust assets, and a personal financial statement for the trustee principal. For trusts with non-cash assets — operating businesses, real estate portfolios, closely-held securities — additional valuation documentation is required. For corporate trustees (banks, trust companies acting in non-trust-department capacities), institutional underwriting protocols apply.
Surety One's non-standard fiduciary program is built for credit-challenged trustees and circumstances where conventional underwriting would decline. Family members appointed as trustees for minor children's settlement proceeds, successor trustees taking over from defaulting prior trustees, trustees serving multiple beneficiaries under contentious instruments — these files are placeable in our non-standard program with appropriate underwriting terms.
Send the trust instrument or appointing order plus an inventory of trust assets. Our underwriters open the file the same business day.