When someone dies without a Will, or there is a Will but no executor is able or willing to obtain probate, the estate may need to be administered through an application for Letters of Administration.
One question that often arises is: “Will I need an administration bond?”
The answer is that an administration bond may be required, particularly where not all beneficiaries consent to the proposed grant. However, the rules are not always straightforward, and the Court has power in appropriate circumstances to dispense with, reduce, or modify the bond requirement.
What is an administration bond?
An administration bond is a form of security given to the Court by a person who is being appointed as administrator of a deceased estate.
The purpose of the bond is to protect the beneficiaries and the estate. An administrator has important responsibilities, including collecting the deceased’s assets, paying debts and distributing the estate to the people legally entitled to receive it.
The bond provides protection if the administrator fails to properly carry out those responsibilities.
Under section 64 of the Probate and Administration Act 1898(NSW), a person to whom a grant of administration is made is generally required to execute a bond before the grant may be issued. Section 65 provides that the Court can, in appropriate circumstances, dispense with the bond or with one or both sureties, reduce the amount, or accept other approved security.
When is an administration bond commonly required?
An administration bond is particularly important where an applicant for Letters of Administration is not the only person entitled to the estate and the other beneficiaries have not provided the necessary consent.
For example, suppose a person dies without a Will leaving three adult children. One child wants to apply for Letters of Administration, but the other two children do not give their consent.
In circumstances where the necessary consents cannot be obtained, the applicant may be required to provide an administration bond and two sureties covering the shares of the beneficiaries who have not consented.
The precise requirements depend on the circumstances of the estate and the application.
What are sureties?
A surety is a person who provides additional security in connection with the administration bond.
Where two sureties are required, their role is to provide financial protection associated with the administrator’s obligations. The requirements concerning the bond and sureties should be considered before filing an application.
If you cannot find suitable sureties, that does not necessarily mean that the estate cannot be administered. There may be alternative procedures or circumstances in which the Court can modify or dispense with the usual requirements.
What if a beneficiary is under 18?
Special considerations apply where a beneficiary is a minor.
A minor cannot personally provide the same consent as an adult beneficiary with legal capacity. The Supreme Court’s requirements provide for consent by an appropriate legal guardian in relevant circumstances. Where the necessary consent cannot be obtained, an administration bond and two sureties may be required.
Particular procedures can also apply where a beneficiary lacks legal capacity.
Can an administration bond be waived?
Yes. An administration bond is not necessarily unavoidable.
Section 65 of the Probate and Administration Act 1898 allows the Court to dispense with the bond, dispense with one or both sureties, reduce the amount of the penalty, or accept other approved security.
Whether the bond can be dispensed with will depend on the circumstances and the requirements of the particular application.
It is important not to assume that every application for Letters of Administration automatically requires the applicant to provide a bond for the full value of the estate.
What about Letters of Administration with the Will Annexed?
An administration bond can also arise where the deceased left a Will but there is no executor available to obtain probate.
This may occur, for example, where the named executor has died, renounced probate, or is otherwise unable or unwilling to act. A beneficiary may then need to apply for Letters of Administration with the Will Annexed.
Examples
Example 1 – all beneficiaries consent:
A person dies without a Will and leaves adult children who all agree that one of them should administer the estate. Depending on the circumstances and the form of the consents, the bond may be dispensed with.
Example 2 – beneficiary refuses to consent:
One child applies for Letters of Administration but another beneficiary does not consent. An administration bond and two sureties may be required in relation to the non-consenting beneficiary’s entitlement.
Example 3 – minor beneficiary:
A beneficiary is under 18. Special requirements apply because the minor cannot personally provide the necessary consent. A bond may be required unless the appropriate procedure for dispensing with it is available.
Get advice before applying
Whether an administration bond is required can depend on the type of grant being sought, the terms of the Will (if there is one), who the beneficiaries are, whether they consent, whether any beneficiaries are minors or lack capacity, and the particular circumstances of the estate.
Getting the application right at the beginning can help avoid delays and additional expense.
If you are considering applying for Letters of Administration or need assistance with Probate or a deceased estate, professional advice can help you understand whether an administration bond is likely to be required and what alternatives may be available.
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