Why security is required at all
A fiduciary appointment gives one person control over assets belonging to another. An executor takes charge of a deceased estate, a trustee administers trust property and a curator manages the affairs of a person who cannot manage them personally. In each case the appointee has access to money and assets that are not their own, and the people entitled to those assets are usually not in a position to supervise the administration day to day.
South African law responds by requiring security to be furnished in defined circumstances, so that there is recourse if the fiduciary misappropriates assets, fails to account, or administers the estate or trust so poorly that a loss results. The security is a protection for the beneficiaries rather than for the fiduciary.
It is not required in every appointment. Each of the three appointments has its own statutory framework setting out when security must be furnished, when an exemption applies, and when the Master may dispense with the requirement.
The three appointments
The requirements differ enough that they should be considered separately. What exempts an executor does not exempt a trustee, and the position of a curator is different again because a court is involved in the appointment.
The pages below deal with each appointment on its own terms, including the statutory basis, the exemptions and the circumstances in which security may be dispensed with.
The fiduciary appointments that attract security
- Executor of a deceased estate, appointed by the Master and issued with letters of executorship
- Trustee of a trust, appointed under the trust instrument and authorised by the Master by letters of authority
- Curator, including a curator appointed to administer the property of a person who is unable to manage their own affairs
- Tutor and other appointments made in respect of a minor or a person under a legal disability
Executors of deceased estates
An executor administers a deceased estate: collecting the assets, settling the liabilities, preparing a liquidation and distribution account and distributing what remains to the heirs. Security is required in defined circumstances, and the legislation distinguishes between an executor nominated in a will and one who is not, with specific exemptions applying to close family members.
The amount of the security is normally driven by the value of the estate assets that pass through the executor's hands, and the cost of furnishing it is dealt with by the legislation rather than left to negotiation.
Read the executor bonds guide →
Trustees of trusts
A trustee administers trust property for the benefit of the trust beneficiaries, and cannot act until authorised by the Master. Security is part of that authorisation framework, subject to a power for the Master to dispense with it in defined circumstances.
The regulatory environment for trustees has changed materially in recent years, with amendments introducing additional duties around beneficial ownership and record-keeping. Those changes sit alongside the security requirement rather than replacing it.
Read the trustee bonds guide →
Curators
A curator is appointed to manage the property or affairs of a person who is unable to do so, and the appointment involves an application to court supported by an investigation into the person's circumstances. Security is furnished to the Master in the same way, but the process reaching that point differs because the court is involved.
Curatorship appointments frequently follow serious injury, illness or the receipt of a substantial award, and the assets under administration can be significant and intended to last a lifetime.
Read the curator bonds guide →
How a court bond is assessed
A guarantor issuing a court bond is standing behind the honesty and competence of an individual administering assets for others. The assessment is therefore about the person as much as about the numbers, and the composition of the estate or trust matters because complexity increases the scope for loss.
Professional fiduciaries who administer estates or trusts regularly are usually assessed on their practice as a whole, including the systems, controls and trust account arrangements they operate, rather than appointment by appointment.
What is normally examined
- The appointment document and the requirement communicated by the Master
- The value and composition of the assets under administration
- Whether the assets include a business, property, offshore holdings or illiquid interests
- The appointee's personal financial position and credit history
- The appointee's experience of comparable appointments
- Where a professional is appointed, the firm's controls, trust account arrangements and professional indemnity cover
- The expected duration of the administration
- The counter-indemnity and any supporting security
The bond does not protect the fiduciary
This is the point most often misunderstood. A court bond protects the estate, the trust or the person under curatorship. It does not protect the fiduciary, and it does not answer a claim brought against the fiduciary personally.
If the guarantor pays out, it will normally recover that payment from the fiduciary under the counter-indemnity. A professional who administers estates or trusts as part of a practice should therefore consider professional indemnity cover as a separate question, because that is what responds to a claim arising from professional services rendered.
Read the legal practices professional indemnity guide →
Practical points for applicants
Security requirements surface at an inconvenient moment. An executor cannot proceed with the administration until letters of executorship are issued, and a trustee cannot act until letters of authority are issued. Where security is required, the bond becomes the item holding up the appointment.
Establishing early whether security will be required, and on what amount, avoids the position where an estate or trust is already in distress before the question is addressed. Where an exemption or a dispensation may be available, that is a matter to raise with the Master through the appointed practitioner rather than to assume.
COMMON QUESTIONS
Court bond questions, answered clearly.
What is a court bond?
It is security furnished by a fiduciary to the Master of the High Court so that the estate, trust or person whose property is being administered has recourse if the fiduciary defaults. It is also called a fiduciary bond or a bond of security.
Who has to furnish security?
Executors, trustees and curators may be required to furnish security, but not in every appointment. Each appointment has its own statutory framework setting out when security is required, which exemptions apply and when the Master may dispense with the requirement.
Who does a court bond protect?
The estate, the trust or the person under curatorship, through the Master. It does not protect the fiduciary. If the guarantor pays, it will normally recover that payment from the fiduciary under the counter-indemnity.
How is the amount of the bond determined?
It is normally driven by the value of the assets that pass through the fiduciary's hands. Composition matters too, because assets such as a business, immovable property or offshore holdings introduce complexity beyond the headline value.
Can the Master dispense with security?
The legislation governing each appointment provides for exemptions and, in defined circumstances, for the Master to dispense with security. Whether that applies in a particular matter should be established through the appointed practitioner rather than assumed.
How long does a court bond stay in force?
For the duration of the administration. A deceased estate may be wound up within a year or two, a trust can run for a generation and a curatorship can last for the lifetime of the person concerned.
Is a court bond the same as professional indemnity insurance?
No. A court bond secures the fiduciary's obligations to the estate or trust through the Master. Professional indemnity insurance responds to a claim made against a professional arising from services rendered. A practitioner acting as executor or trustee should consider both.
What will a guarantor want to know?
The appointment document and the Master's requirement, the value and composition of the assets, the appointee's personal financial position and credit history, their experience of comparable appointments and, for professionals, the controls and trust account arrangements of the practice.
Can a lay person furnish security?
It depends on the appointment, the amount and the individual's own circumstances. A guarantor is standing behind the honesty and competence of the appointee, so personal standing and experience carry substantial weight in the assessment.
When should the security question be raised?
As early as possible. An executor cannot proceed until letters of executorship are issued and a trustee cannot act until letters of authority are issued, so where security is required it becomes the item holding up the appointment.
