How security bond premiums are calculated, when they’re charged, and how to cancel one
Attorneys who have a valid Fidelity Fund Certificate, can apply to the Legal Practitioners Indemnity Insurance Fund, for a free executor security bond, however if you are not an attorney, or don’t want to wait several months, security bonds for executors, curators, trustees and liquidators have a premium charge. Rodel Risk Solutions provides all these security bonds at the rate set by the Master of the High Court.
With years of specialist experience in security bond administration, across all of South Africa’s nine provinces, Rodel Risk Solutions has created a unique approach to assisting our clients with premiums.
In this article, Megan Mei at Rodel Risk Solutions explains how premiums work and when they are no longer charged (reference is made to “estate” but interchangeable with any type of security bonds)
Rodel Risk Solutions believes that premium payments can be delayed. To assist our clients and in 99% of circumstances, premiums are only payable once funds are received in the estate, curatorship, trust or liquidation bank account.
How are Security Bond premiums charged – standard practice explained
1. After a security bond is issued, our online system generates a debit note (or invoice) for your records, it’s not an immediate payment request.
2. Every year on the anniversary of the bond, a renewal debit note is sent.
3. Premiums remain due until the matter is finalised in accordance with Section 35 of the Administration of Deceased Estates Act 66 of 1965 and to the Master’s requirements.
4. Because security bond is a formal guarantee issued to the Master of the High Court and not an insurance policy, there are no pro rata rates or refunds, premiums are charged on a 12 month cycle
5. Once the matter is finalised, the bond is cancelled and no further premiums are charged, read a few paragraphs down for a full explanation of this process.
What if there’s a delay in Letters of Authority or Estate Funds: it’s not always standard practice with Rodel Risk Solutions
Rodel Risk Solutions believes that security bonds should facilitate the administration of estates, not create additional hurdles. Security bond premiums are often paid from estate funds, which may only become available once the Master has issued the relevant Letters of Authority (the formal document authorising the Executor or appointed party to act on behalf of the estate)
Standard practice is that the premium becomes due when the bond is issued, but Rodel Risk Solutions is happy to allow a delay in payment while the Letter of Executorship/ Authority is being processed, helping you ensure the administration of the estate can continue smoothly.
In circumstances where a Letter of Executorship/ Authority has been delayed for more than 12 months, we review each matter individually. Depending on the circumstances, consideration may be given to writing off the first year’s premium. Each case is assessed on its own merits, ensuring a fair and practical outcome.
Adjusting your Security Bond: Increases and Reductions explained
Rodel Risk Solutions always works from the value provided on the inventory which is submitted to the Master, this avoids discrepancies, which can cause delays with the Master, but we appreciate that the inventory is an estimated value at the time of reporting. You can read our article The Master has asked for a security bond
In many occasions, the value of the assets might be found to be lower than the original inventory, you would need to request a reduction in the bond to the Master and send us your stamped request. We can action a reduction and premiums would be adjusted down from inception date
It might transpire that the value of assets is a higher value and at that stage the Master might call to increase the bond, we would increase the value of the bond and premiums from inception
Resignations: What Happens to Security Bond Premiums?
If you work with a lot of estates, you know how horribly they can go wrong and sometimes there is no other option but to resign as Executor. Rodel Risk Solutions understands that it is not ideal and that it is sometimes out of our client’s control. Making sure that the Master of the High Court as well as the beneficiaries & creditors have been informed is a priority. Then depending on how long after the Letter of Executorship/ Authority has been issued and what funds have been under the executors control/ authority, we can create a solution for premium payments. As a rule of thumb, if the resignation happens within the first 12 months or before the Letter of Executorship/ Authority is issued, Rodel Risk would write off the premium.
What Do I Need to Cancel a Security Bond in South Africa?
Closing off a Security Bond shouldn’t be a hassle and at Rodel Risk Solutions we make sure it isn’t!
A security bond is cancelled once the Master issues a Reduction to Nil, which is the point at which the estate has been fully wound up and the appointed party’s obligations are discharged. Obtaining this from the Master can be exceptionally difficult, which is why Rodel Risk Solutions has developed a tailored checklist while you wait for the reduction to nil/ filing slip (the Master’s written confirmation that no further action is required, formally closing the matter)
Because every matter is different and every Master’s office works in its own way, here’s what we generally need to make a Security Bond inactive:
– Copy of stamped Liquidation and Distribution Account- Confirmation of no objections to Liquidation and Distribution Account
– Copy of Master’s consent to distribute
– Copy of Estate Bank Statement reflecting a NIL balance
– Stamped letter to the Master requesting a reduction to nil/ filing slip
9 out of 10 times you already have everything on the list
Do you want to know what your premiums will look like? Use our online calculator for an instant quote, or if you want to know more about a resignation, or closing off a matter – our team is just a call or email away, because security bonds shouldn’t be complicated. Rodel It!
Email: [email protected] | Tel: 087 550 1859
See what our clients say read our Google Reviews