Monday, February 13, 2017

New Jersey Probate & Estate Administration: The Refunding Bond and Release

By: Justin M. Smigelsky, Esq.
Pursuant to the New Jersey Probate Code, the personal representative of an estate (executor, executrix, administrator, or administratrix) is required to “take a refunding bond” upon making a distribution to a beneficiary of the estate. Specifically, N.J.S.A. 3B:23-24 states:
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.
Furthermore, pursuant to N.J.S.A. 3B:23-26, the Refunding Bond must be conditioned substantially as follows, for devisees and distributes, respectively:
That if any part or the whole of the devise shall at any time thereafter be needed to discharge any debt or debts, devise or devises, which the personal representative may not have other assets to pay, he, the devisee, will return his devise or that part thereof as may be necessary for the payment of the debts, or for the payment of a proportional part of the devises
Or, as to distributees,
That if any debt or debts, truly owing by the intestate, shall be afterwards sued for and recovered or otherwise duly made to appear, and there shall be no other assets to pay, he shall refund and pay back to the administrator his ratable part of the debt or debts, out of the part and share so allocated to him.
In modern practice, the personal representative of an estate will usually combine a Refunding Bond document with a Release document (jointly referred to as the “Refunding Bond and Release”) and, once properly executed by each beneficiary, file same with the county surrogate. In sum, the Refunding Bond and Release document serves a dual purpose: (1) the person or entity receiving a distribution from the estate agrees to refund out of his or her share the ratable part of any unpaid debts owed by the decedent for which no other assets are available for payment, and (2) to discharge the personal representative of the estate of his or her duties upon distribution to the beneficiary of his or her share. Generally, the personal representative should not make distributions to beneficiaries until a properly executed Refunding Bond and Release is secured from each beneficiary.

Because estate and trust planning, administration, and litigation requires specialized knowledge, you may wish to consult with an experienced attorney if you have questions regarding your estate plan, the probate process, administration of an estate or trust, Medicaid liens asserted against an estate, the elective share, fiduciary obligations, preparation of a formal or informal accounting, refunding bonds and releases, and the procedures for filing a formal accounting or exceptions thereto. This article is for information purposes only, and is neither legal advice nor the creation of an attorney client relationship.

Justin M. Smigelsky, Esq. /  Timothy J. Little, P.C.  –  2017  –  All Rights Reserved

Timothy J. Little, P.C. is a full-service law firm with offices in Woodbridge and Chesterfield, New Jersey. Timothy J. Little, P.C. offers specialized legal assistance to individuals, families and businesses throughout New Jersey including Middlesex County (Old Bridge, Woodbridge, Sayreville, East Brunswick, Spotswood, Perth Amboy, Dunellen, Colonia, Sewaren, Iselin, Avenel, Fords, Keasbey, Menlo Park, Port Reading, South Amboy, Monroe, Edison, Carteret, Cranbury, Helmetta, South River, Milltown, Highland Park, Jamesburg, Laurence Harbor), Monmouth County (Aberdeen, Matawan, Hazlet, Holmdel, Cliffwood Beach, Keyport, Keansburg, Middletown, Lincroft, Manalapan, Englishtown, Marlboro, Freehold), Union County (Rahway, Elizabeth), Ocean County, Somerset County, and Burlington County (Chesterfield, Bordentown, Beverly, Florence, Medford, Mansfield, Maple Shade, Bass River). If you have any questions or concerns regarding estate planning, estate administration, or estate litigation, contact the experienced estate attorneys at Timothy J. Little, P.C.
Estate Practice Specialties: Drafting of Wills and Trusts, appointment and removal of fiduciaries, probate procedures, intestacy, fiduciary duties and obligations, fiduciary accountings and exceptions, fiduciary compensation, marshaling of assets, insolvency petitions, will contests and disputes, caveats, the elective share, Power of Attorney abuse, ejectment and eviction, Refunding Bonds and Releases, New Jersey Transfer Inheritance Tax (IT-R), New Jersey Estate Tax (IT-Estate)

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