Veterans Administration Bonds

The Veterans Administration Bond, also known as the VA Custodian Bond, is a corporate surety bond that protects the misuse of funds through the federal fiduciary serving as a legal custodian that acts as a legal payee on behalf of a VA benefit entitled incompetent beneficiary. The Veterans Administration generally orders VA bonds for instances where a party is no longer able to manage their affairs due to illness or age, whether this be the person caring for themselves or their estate. A VA bond could be compared to a guardianship or conservators bond but designed specifically to assist with VA benefits. 

How Does a VA Bond Work?

A VA bond consists of three people - the beneficiary, the fiduciary, and the dependent. The beneficiary is either the veteran or their survivor who has been awarded VA benefits, but is, or has since become, unable to manage these benefits due to age, declining health, injury, or being under the age of 18. The fiduciary is the entity or individual appointed by the VA to receive VA funds on behalf of the beneficiary to be used to support the beneficiary and their dependents, if any. The dependent is the beneficiary’s spouse, parent, or child who lacks the income to meet their personal and/or family needs and depends on the beneficiary for support.

When you are deemed the fiduciary in a VA bond, the beneficiary’s bonds are protected up to their face value. Fiduciaries have the authorization to deduct the cost of a surety bond from the beneficiary’s VA funds.  To ensure the bond is active and ensure the VA’s information on the beneficiary is up to date, the VA will check in periodically to touch base with the fiduciary. 

Fiduciary Responsibilities

A fiduciary for a VA bond must have thorough understanding of the beneficiary’s needs so they can be in the best position to decide how the funds are used. This means knowing their unique preferences, beliefs, values, and circumstances. Beneficiary assets must be managed in a way to provide the same standard of living as an individual with full control over a similar level of resources. Fiduciaries should assure that the beneficiary maintains proper medical care, which involves keeping regular contact with all healthcare providers. This includes, but is not limited to physicians, mental health providers, and social workers. 

Fiduciaries must manage all of the beneficiary’s bills in a timely manner. This includes their income taxes, if applicable. Collecting rent or any unpaid debts on behalf of the beneficiary’s arrangements with outside parties, as well as purchasing insurance on any possessions or estates, would also be part of financial management. Fiduciaries should be able to manage and place the beneficiary’s funds into safe accounts or investments, protect funds from any unnecessary loss or creditors, and be prepared to provide any additional protection as the VA requires. 

How Much Does a VA Bond Cost?

The Department of Veteran Affairs is responsible for determining the total amount of the bond, or your maximum liability within its term. Usually, the cost is estimated as the total sum of the managed funds in addition to the anticipated income from VA benefits for the duration of the accounting period. When you purchase a bond, you are only required to pay a premium, which is a percentage of the total bond amount. Your premium is determined by a variety of factors, including your credit report, credit score, financial statements, and the court documents from your application as fiduciary. 

While rates vary, annual premiums typically range from 2-5% of the bond amount. However, you are able to deduct your bond premium from the beneficiary’s assets. You will be expected to make premium payments as long as you are in the position of fiduciary.

Propeller Bonds is our partner who works directly with our customers to write veteran bonds. Feel free to contact our team as well if you have any questions about VA bonds.