Guardianship Bonds for Court-Appointed Guardians

A guardianship is a relationship established by a court between an adult and a minor or another incapacitated person. The person subject to the guardianship is commonly referred to as the guardian’s ‘ward’ or ‘protected person,’ depending on the jurisdiction. The court grants the adult guardian the authority to manage any assets and income the ward may have and, in many cases, make other important decisions regarding them.

Guardianship carries fiduciary responsibilities, which can be summed up as “always acting in the best interests of the minor.” The standards published by the National Guardianship Association require the guardian of the estate to safeguard estate assets, keep accurate records of transactions, and be able to account for the property under their control.

A guardianship bond is a type of court bond used when a court requires financial security from a person responsible for a ward’s assets. Its main purposes are:

• To ensure that a guardian complies with all laws and rules governing the fiduciary duties that go along with the guardian role
• To provide a way to compensate the ward in the event of a financial loss caused by the guardian’s illegal, unethical, or negligent actions

The scope of an authority over the ward’s property or estate depends on the state. For example, in South Carolina, financial management is generally assigned to a conservator rather than a guardian.

The probate court normally requires the conservator to provide a bond based on the estimated value of the protected person’s personal estate and expected income for the next year, unless the court finds good cause not to require one.

In Ohio, a guardian who has property under their control is generally subject to the local requirements. The bond must normally be at least twice the probable value of the personal property and annual real-property rentals under their control.

When Courts Require a Guardianship Bond

Guardianship bond requirements vary by state and by the responsibilities assigned in the court appointment. Some states also separate personal guardianship duties from financial duties handled by a conservator.

In states that separate guardianship and conservatorship, the person managing the estate may need a conservator bond. Both are types of court bonds, but the required surety bond form must match the appointment.

Sometimes, the guardian for a minor may have been chosen by the parents and named in their will, then confirmed by a probate court. In other cases, the parent(s) may be living but deemed not capable of managing the child’s assets and income. Whatever the situation may be, the court determines if and when a bond is required.

How Does a Guardianship Bond Work?

Like other surety bonds described by the Bureau of Fiscal Services, a guardianship bond is a legally binding contract between three parties:

• The court requiring the bond and establishing the required bond amount and its terms — “obligee.”
• The guardian required to purchase the bond and abide by its terms and conditions — “principal.”
• The bonding company that underwrites and issues the bond — “surety.”

If the principal causes a financial loss by failing to perform the duties secured by the bond, a claim can be filed. If the claim is valid, the surety may pay for the loss up to the bond amount.

The principal remains responsible for reimbursing the surety for a paid claim. This is an important difference between surety bonds and ordinary insurance, where the policyholder generally transfers covered risk to the insurer.