Refunding Bond and Release
Whenever an executor or administrator of a probate estate is ready to distribute assets to beneficiaries, they typically will request those beneficiaries sign, notarize, and return a document known as a refunding bond and release. The common abbreviation for this term is an “R&R.” The refunding bond and release is actually two, combined: the refunding bond, and the release.
As I’ve discussed in my blog post about renunciations, a personal representative of a probate estate - known as an executor for testate estates or those with wills, and as administrators for intestate estates or those without wills - may sometimes be required to post a bond with the court. A probate bond is similar to insurance, and indeed, probate attorneys will typically analogize to insurance policies. However, a distinct difference between the probate bond and an insurance policy is that insurance is meant to protect the insured, whereas the probate bond is meant to protect the estate - not the bonded!
An executor or administrator has a fiduciary duty to the probate estate (beneficiaries and creditors). That duty is of loyalty and care to marshal, protect, maximize, and distribute the assets. That duty also applies to creditors of the probate estate as the executor or administrator must pay the debts. While most wills dispose of the need for a bond, most intestate estates will require a bond, and some testate estates may in certain situations.
The purpose of the refunding bond, then, is to do what its name implies: refund the bond. Therefore, many attorneys advise their clients to have the beneficiaries sign and return the refunding bond and release so it may be filed to ensure beneficiaries and the estate executor or administrator has done everything in proper order. Once the refunding bond and release is properly filed, the bond on the executor or administrator is “refunded,” meaning they no longer have to make the yearly premiums.
Another purpose for the refunding bond and release is to put creditors and lienors at notice that there is no longer any assets in the probate estate. This is important because the executor or administrator may be found personally liable if they negligently distribute from the estate. That would result in treble (three times) damages and attorneys fees.
Finally, it is notable that there is no formal way to close a probate estate. Filing the refunding bond and release with the Surrogate serves as constructive notice to the world that the probate estate is “wound up.” By winding up, all the debts and taxes must be paid (if estate and inheritance taxes do apply), and the remainder distributed to the beneficiaries. Often, it is also advisable to have an accounting of probate assets, and in some instances an accounting is required to have an effective refunding bond and release. Briefly, if the beneficiaries do not agree to the accounting, the executor or administrator may have to file a complaint with the court to approve their accounting and advise as to distribution per Rule 4:87-1 et seq. and Rule 4:89-1 et seq. However, an informal accounting, done by probate attorneys and which look much different from accountant versions, can obviously save the probate estate thousands of dollars and significant time in efficiency.
If you were asked to sign a refunding bond and release, or if you are looking to ensure that a refunding bond and release is prepared correctly, you can email me at Ranalli@ranalli-law.com. Your rights and privacy are 100% protected. We never sell or share your information. No one wants spam email and I respect your right to privacy. I am here to help you.
