Bonds of Security / Court Bonds
A security bond is used when Master of the High Court requires security where he appoints a person to be a custodian / responsible person for someone else’s assets.
The bond of security protects the estate from any negligent act from the appointed person.
It is a demand bond, so if the security is called up by the Master of the High Court it must be paid immediately.
- Liquidation bonds: A Liquidator is appointed on insolvent estates, the liquidator will track down all the assets belonging to the estate, sell them and pay the creditors.
- The Master of the High Court requires a Liquidator or Trustee that is appointed in an insolvent estate to lodge a Bond of security with them. The Bond of security is provided by an Insurance Company to cover the estate against any misappropriated by the Liquidator or Trustee. It protects the creditors and other beneficiaries of the estate.
The Master sets the value required for the security after various processes. The Bond of Security is lodge at the Master of the High Court’s offices for the appointed liquidator.
In case of a claim against the Bond of security the Master of the High Court will call on the Bond of Security. The money will be paid to the Master of the High court.
Curator Bonds: Curator Bonds matter relating to incapacitated persons’ estates. Also in The Prevention of Organised Crime Act – where someone has unlawfully gained in terms of the Act; application can be brought to freeze the assets and for the recovery of the assets.
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- Executor Bonds: An Executor is appointed on a deceased estate, the purpose of the appointment is to distribute the assets of the deceased to the beneficiaries in terms of a will (if it exists).
Who requires Executors bonds?
- Attorneys – if they have reached their limit with the AIIF (R20 000 000 cumulative, a bond exceeding R5 000 000)
- Administrators of deceased estates
- Only an executor whose appointment has been confirmed by the Master of the High Court may manage the assets and liabilities forming part of the deceased’s estate. An executor’s duties are:
1. To collect all the deceased’s assets. These assets comprise fixed properties, furniture, firearms, vehicles, shares, proceeds of insurance policies, outstanding debts owed to the estate, cash assets and all other possible interests the deceased may have had.
2. To collect all debts against the estate and to settle them after their validity has been investigated
3. To divide the balance of the assets among the rightful heirs after all debts against the estate have been paid
The executor must administer the assets of the deceased with utmost care and protect the interests of the creditors and heirs throughout the administration process. The executor reports to the Master of the High Court during the administration process and the Master may request further particulars and specific documentary evidence from the executor at any time. The Master of the High Court can also require an Executor to provide a bond of security before being appointed.
Once the executor has completed the administration process, as described in the Administration of Estates Act, they will be able to finalise the estate. This involves handing over the inheritances to the heirs
Costs for the provision of security to the Master in cases where the executor does not qualify for an exemption
In terms of the Administration of Estates Act, only certain executors are exempt from providing security to the Master. If a nominated executor does not qualify for the exemption, the Master will insist that the executor provide the necessary security for the value of the estate, before the executor’s appointment is confirmed. The security must be in the form of a Bond of Security, issued by a short-term insurance company. The current annual rate for this amounts to 0,684% on the value of the security, with a minimum annual premium of R300.
Road Accident Fund Trust beneficiaries receive a pay out from the RAF, due to the fact that they have been involved in an accident and have possible limited employment opportunities or are minors. These funds are to be protected and a trustee is appointed to do this. To protect the trust against the negligence of the trustee the master requires a bond of security for the amount that was paid to the trust.
- Medical Malpractice Trusts
A Medical Practitioner who has failed to foresee the possibility of harm being suffered by his patient in circumstances where another reasonable practitioner in the same position would have foreseen the possibility of harm occurring and would have taken the necessary steps to avoid or prevent it, is guilty of Medical Negligence. Where money is paid out into a trust, the trustee will be required to provide a bond of security before appointment.