Quick answer: A bond of security is a type of surety bond that guarantees a person appointed to a position of trust, such as an executor, curator, trustee or liquidator, will manage other people’s assets honestly and lawfully. It is normally lodged with the Master of the High Court, and if the appointee causes a loss, the surety covers it and then recovers the amount from the appointee.
The premium is generally calculated as a percentage of the value of the assets being managed. It varies by surety and appointment, so always get a written quote.
What is a bond of security?
A bond of security is a financial guarantee protecting people whose assets are managed by someone else, for example beneficiaries of a deceased estate, or a person who cannot manage their own affairs. It involves three parties:
| Party | Role | Example |
|---|---|---|
| Principal | The person appointed to the position of trust | Executor, curator, trustee, tutor or liquidator |
| Obligee | The party to whom the guarantee is given | Typically the Master of the High Court |
| Surety | The insurer or institution that guarantees performance | A South African insurer |
How does the process work?
- Need identified. The Master decides whether security is required for the appointment.
- Application. The principal applies through a broker or a surety provider.
- Risk assessment. The surety reviews the appointment and the appointee’s experience and finances.
- Issue. If approved, the surety issues the bond.
- Lodging. The bond is lodged with the Master as proof of the guarantee.
- Premium. The premium is paid, and in an estate it is generally treated as an administration cost.
Types of bonds of security in South Africa
| Bond | Who it covers | What it protects |
|---|---|---|
| Executor bond | Executor of a deceased estate | Estate beneficiaries and creditors |
| Curator bond | Person managing the affairs of someone who is incapacitated | The incapacitated person’s assets |
| Trustee bond | Trustee of a trust | Trust assets and beneficiaries |
| Liquidation bond | Liquidator or trustee in an insolvency | Creditors |
| Tutor bond | Person managing a minor’s finances | The minor’s assets until they come of age |
For more on executor bonds specifically, see our page on executor bonds and bonds of security.
Bond of security vs insurance
| Feature | Bond of security | Insurance policy |
|---|---|---|
| Purpose | Guarantees an individual’s performance of their duties | Transfers the risk of a potential loss to an insurer |
| Parties | Three: principal, obligee and surety | Two: insurer and insured |
| Claims | The surety pays the obligee, then recovers from the principal | The insurer pays the insured, with no recovery from the insured |
How much does a bond of security cost?
Premiums are calculated as a percentage of the value of the assets involved and vary by surety and type of bond. Some providers publish executor bond rates of around 0.5% of the estate’s asset value plus VAT, charged annually, and figures for other bond types can be similar or a little higher. Treat these as indicative only and ask for a written quote.
| Illustrative example | Amount |
|---|---|
| Estate asset value | R2,000,000 |
| Indicative premium at 0.5% | R10,000 plus VAT |
Example only. Actual premiums depend on the surety, the asset value and whether the bond is charged annually.
In an estate, the premium is generally an administration expense payable from the estate rather than from the executor’s own pocket. In some cases the Master may exempt an executor from providing security, for example where the will waives it and the Master approves, so check before you apply.
Why bonds of security matter
- Accountability. Appointees are answerable for how they handle assets.
- Protection against mismanagement. A safety net for negligence or fraud.
- Legal compliance. Security is often a requirement for the appointment to proceed.
This is general information, not legal advice. If you are appointing an executor, curator or trustee, speak to an attorney or estate professional as well.
FAQs
What is a bond of security in simple terms?
It is a guarantee from a surety that someone appointed to manage another person’s assets will do so honestly, lodged with the Master of the High Court.
Who pays for the bond?
In an estate, the premium is generally paid from the estate as an administration cost.
Is an executor always required to provide security?
Not always. The Master decides, and security may be waived in some circumstances, such as where the will exempts the executor and the Master agrees.
How can New Heights Finance help?
We are a finance broker and can introduce you to sureties who arrange executor bonds and bonds of security. Acceptance is decided by the surety.
Need a bond of security?
Speak to us about executor bonds and bonds of security and how we can introduce you to the right surety.