To comprehend the purpose of a Fiduciary Bond, it will be better to look at the meaning of fiduciary first. In technical terms, a fiduciary is someone who is given power to control somebody’s assets and interests. However this someone (the fiduciary) is also under the boundaries of law or under moral and ethical values of trust. To put it more simply; a fiduciary is that person, who has been assigned to take care of somebody’s money when that somebody is no longer in a position to do so.
Fiduciaries can also be included in a person’s will, but if the will is not available, then the person’s spouse and the children are given first preference. If the spouse or children are also not available, then close relatives are given the next preference to take up the role of a fiduciary. However, if the relatives too don’t turn up to take up the role of a fiduciary, then the case is conferred to a probate court, where a judge takes the decision to appoint a fiduciary who actually meets the conditions required for undertaking the responsibilities of a fiduciary. Once a person is appointed as a fiduciary, he or she is then required to buy a fiduciary bond. This legal instrument is put in place to protect the interests of beneficiaries, heirs and creditors from the fiduciary, in case the fiduciary fails to carry out assigned responsibilities in an honest and desired way. Owing to the nature of a fiduciary’s duties and responsibilities, this bond assumes a great importance for the beneficiaries, as it also serves as their last line of defense against a fiduciary’s incompetence and foul play.
This Court & Fiduciary bond imposes an obligation on the surety or the company that is issuing the bond to pay to the court a definite sum of payment in the condition, if the fiduciary is found to be in breach of his/her responsibilities and duties. For example, if the fiduciary gets involved in theft, deceit, or stealing from the trust whose responsibility he or she is entrusted with, a fiduciary bond helps in limiting the damages by asking the surety to cover for the losses incurred due to fiduciary’s wrongdoings. However, this safety net is not limited to only intentional acts of fraud and wrongdoing by the fiduciary; it also covers for losses caused due to negligence or carelessness on the fiduciary’s part as well.