Legal Question in Wills and Trusts in New Jersey

Release & Refunding Bond in Probate matters

Under New Jersey law it is the duty of the fiduciary [Executor or Administrator] to make arrangements to pay bills and other estate expenses and carry out instructions under the Will. NJSA 3B:23-24 provides the fiduciary shall take a Release and Refunding Bond from each beneficiary.

The attorney for the estate prepares the Release and Refunding Bond. The approximate amount that beneficiary will release is typed on the release form. It is mailed the beneficiaries with the following language:

�Please read the enclosed draft Release and Refunding Bonds and estate accounting. If you have any questions regarding the accounting, please call the executor directly since they have the bank records. The law office does not have bank records. Every beneficiary will need to sign their Release and Refunding Bond. If any beneficiary does not sign their release and refunding bond, then the estate funds cannot be distributed to anyone until approved by the Superior Court. An Accounting and Court approval under Rule 4:87-1 would take many months. We are requesting all beneficiaries to immediately make arrangements to sign the Release and Refunding Bond in front of a notary, and return it to my office. Please also note under New Jersey law each beneficiary must certify they do not owe child support. Please fill out the child support section by hand.

The Release & Refunding Bond must be filed with the County Surrogate and a fee paid. �

By statute (N.J.S.A. 3B:23-24) an Executor or Administrator is required on paying a beneficiary his/her share of the estate, to take a Refunding Bond and Release from the beneficiary and to file the bond in the Surrogate�s Court. The statute requires that the Refunding Bond and Release be in the amount or value of the beneficiary�s share of the estate. The beneficiary must sign the Refunding Bond and Release before a Notary Public or attorney. If the beneficiary is a minor or incapacitated person, the Refunding Bond and Release must be signed by the guardian of the property.

The Refunding Bond and Release has a dual purpose:

Refunding � To refund to the Executor or Administrator out of his/her share of the estate his ratable part of any unpaid debts, owed by the testator or intestate, if there are no other assets to pay them.

Release - To discharge the Executor or Administrator of an estate of his/her duties upon distribution to the beneficiary of his/her share of the estate.

In an Administration without a Will that required a Surety Bond, the Administrator must request a Certificate of Release from the Surrogate at the time he/she files the Refunding Bond and Release. A Surety Bond will not be cancelled by the insurance agent unless the Certificate of Release is presented to the agent.

It is necessary to file the completed Refunding Bond and Release from each beneficiary of the estate with the Surrogate�s Court. The statutory fee for filing is $ 10.00 per bond and $ 5.00 for the Certificate of Release.

Source: http://nj.gov/counties/mercer/officials/surrogate/s_refunding.html

If all the beneficiaries do not sign their Release and Refunding Bond, then a Superior Court lawsuit must be filed called Actions For The Settlement Of Accounts under RULE 4:87. The Court Rule on Accounting is below.

NJSA 3B:23-24. Refunding bond of devisee or distributee A personal representative shall, on paying a devise or distributive share or on delivering an instrument of distribution to the person entitled, take a refunding bond therefor, to be filed in the office of the surrogate of the county wherein he received his letters or in the office of the clerk of the Superior Court, if he received his letters from the Superior Court.

RULE 4:87. Actions For The Settlement Of Accounts

4:87-1. Procedure

(a) Actions to settle the accounts of executors, administrators, testamentary trustees, non-testamentary trustees, guardians and assignees for the benefit of creditors shall be brought in the county where such fiduciaries received their appointment. The action shall be commenced by the filing of a complaint in the Superior Court, Chancery Division, and upon issuance of an order to show cause pursuant to R. 4:83. A non-testamentary trustee shall annex to the complaint a copy of the written instrument creating the trust and stating its terms. The order to show cause shall state the amount of commissions and attorney's fee, if any, which are applied for.

(b) An action may be commenced by an interested person to compel a fiduciary referred to in paragraph (a) of this rule to settle his or her account, and, in appropriate circumstances, to file an inventory and appraisement.

4:87-2. Complaint

The complaint in an action for the settlement of an account

(a) shall contain the names and addresses of all persons interested in the account, including any surety on the bond of the fiduciary, specifying which of them, if any, are minors or mentally incapacitated persons, the names and addresses of their guardians, or if there is no guardian then the names and addresses of the parents or persons standing in loco parentis to the minors;

(b) shall specify the period of time covered by the account and contain a summary of the account. The summary shall state, all as shown by the account: (1) in the case of a first accounting, the amount for which the accountant was chargeable as of the date the trust or obligation devolved upon him or her, or where an inventory is on file, the amount of the inventory; or in the case of a second or later accounting, the balance remaining in the hands of the accountant as shown in the last previous account; (2) the amount for which the accountant became chargeable in addition thereto; (3) the total of the first two items; (4) the amount of the allowances claimed in the account; and (5) the balance in the accountant's hands. Charges and allowances sought on account of corpus and income shall be stated separately both in the summary and in the account;

(c) shall have annexed thereto the account which shall be dated;

(d) shall ask for the allowance of the account, and also for the allowance of commissions and a fee for the accountant's attorney, if accountant intends to apply therefor; and

(e) shall be filed at least 20 days prior to the day on which the account is to be settled.

4:87-3. Form of Account; Statement of Assets to Be Annexed to Account

(a) Form of Account. The charges and allowances as to principal and income and the statements required to be annexed to the account may be typed or in the form of computer or machine printouts; and, where appropriate, the accountant may use a single schedule for the presentation of portions of the account, but charges and allowances as to corpus and income shall be stated separately.

(b) Statement to Be Annexed to Account. To all accounts shall be annexed:

(1) a full statement or list of the investments and assets composing the balance of the estate in the accountant's hands, setting forth the inventory value or the value when the accountant acquired them and the value as of the day the account is drawn, and also stating with particularity where the investments and assets are deposited or kept and in what name;

(2) a statement of all changes made in the investments and assets since they were acquired or since the day of the last account, together with the date the changes were made;

(3) a statement as to items apportioned between principal and income, showing the apportionments made;

(4) a statement as to apportionments made with respect to transfer inheritance or estate taxes;

(5) a statement of allocation if counsel fees, commissions and other administration expenses have been paid out of corpus, but the benefits of the deductions from corpus have been allocated in part or in whole to income beneficiaries for tax purposes; and

(6) a statement showing how the commissions requested, with respect to corpus, are computed, and in summary form the assets or property, if any, not appearing in the account on which said commissions are in part based.