When someone becomes disabled and requires another individual to take care of their financial needs, that individual is often referred to as the custodian for the disabled person. A custodian is also an individual that is responsible for the assets of the estate after someone dies. The hope is that the custodian is honest. They should use the money that they are responsible for in the right way to benefit the right people.
The problem with setting up a custodian, is that not all of them are honest. They will use the money they have access to for their own benefit. This is called fraud. Some custodians mismanage the money they are responsible for without gaining any benefit. It really does not matter if the money in the custodian’s care is lost through fraud or mismanagement. Thee4 bottom line is that it is gone and that can cause many different problems. The solution to this potential problem is to obtain a custodian bond that guarantees the money will be there when it is needed.
What is it?
Custodian bonds are purchased by the custodian of the assets. They guarantee the assets will be protected in the event of fraud ort misuse on the part of the custodian. In many ways it is an insurance policy for the people that are supposed to receive the assets. It may seem like an insurance policy but it is actually something different.
The difference stems from the way the custodian bond is paid for and the way that it is paid in the event of a claim. A custodian bond does not require regular premiums. The cost of the custodian bond is based on a percentage of the total amount of the bond. This fee may only have to be paid one time. If a claim is made against the bond, the individual making the claim will be paid from the bond. The amount that is paid for the claim will have to be repaid by the individual that purchased the bond. An insurance policy does not require the claims that are paid out to be repaid.
Who needs them?
There will be different people that need to get a custodian bond. In general anyone that is responsible for a custodian account for someone else should consider getting this product. If the person that is acting as the custodian has been approved for this role by the court, they will usually be required to purchase a custodian bond. Companies that act as custodians for estates and for individuals with disabilities will also often be required to purchase these bonds. The bond will need to be in place as long as the custodian is managing the funds.
How to get them?
There are many companies that offer these bonds. Custodian bonds are just one type of surety bond that people get. Surety bonds guarantee payment in many situations. In order to get a custodian bond or any type of surety bond, the individual or the company will have to fill out an application and will have to undergo a credit check. It is possible that they will be denied the bond if they do not have good credit.
When searching for a company to get the custodian bond from, you should look for a few different things.
- The cost of the bond – There will be different costs depending on the company
- The reputation of the company – You want a company that will pay the bond if needed
- The state you live in – There may be a need to find a bond company that is able to sell the bonds in your state
The internet makes it fairly easy to shop around for the right company to buy a custodian bond from. Make sure that you look at them carefully as you make the decision about who to buy it from. The individual buying the bond and the person that is protected by the bond deserve that effort.