What is a Security Bond?

A security bond (also sometimes called a surety bond or deputy bond) is a legal requirement for those appointed by the Court of Protection (“the Court”) to function as a deputy for the property and financial affairs of someone who lacks mental capacity.

It acts as a guarantee or insurance that protects the assets of the person who lacks capacity (often referred to as “P”) against losses arising from mismanagement, neglect, or misuse of funds by the deputy.

This requirement does not reflect on the deputy’s integrity but is a standard safeguarding mechanism required by the Court.

Why is a Security Bond Required?

When someone loses capacity to manage their financial affairs and no valid lasting power of attorney is in place, the Court may appoint a deputy under the Mental Capacity Act 2005. The deputy’s role is to manage the person’s assets, income, property, and finances in the person’s best interests and in accordance with the Court’s order.

As the deputy may control significant assets, the Court requires “security” in the form of a bond to provide a layer of protection. If the deputy causes a loss to the person’s estate, the bond ensures funds are available to recompense that loss.

In practical terms, one cannot legally begin exercising the deputy’s powers until the bond is in place and confirmed to the Court.

How is the Amount of the Security Bond Set?

The amount of the bond, sometimes referred to as the “security amount,” is set by the Court in its order.

The value considers the size and nature of the protected person’s estate including cash, investments, property, non-cash assets, and how much of that the deputy will control.

The bond value may be reviewed and adjusted if the estate increases significantly or the deputy’s powers change. The initial bond is also typically set higher than the exact estate value to allow for these fluctuations.

Who Pays the Security Bond and When?

The bond premium is paid out of the protected person’s estate (their own funds) not the deputy’s personal funds.

The premium must normally be in place before the Court issues the sealed order appointing the deputy.

The bond must remain in place for the duration of the deputyship, and in many cases, there is an annual renewal premium.

If the deputyship has a “single-premium” arrangement (sometimes when the estate is small) then one upfront payment may cover the entire appointment duration.

What Does a Security Bond Cover?

The bond operates as a guarantee to pay any loss suffered by the protected person’s estate because of the deputy’s failure to perform their duties properly or in accordance with the Court’s directions.

Importantly, the bond does not provide protection for the deputy and if a claim is made, the bond provider may reclaim the amount from the deputy.

The bond may cover losses resulting from negligence, mismanagement, fraud, or a breach of the Court’s directions.

If the bond is “called upon,” this means the insurer pays out to the estate, and the insurer then seeks to recover those funds from the deputy.

Key Steps to Arrange or Review a Security Bond

1. Check the Court Order: Ensure that the bond amount is clearly set out and that you understand your powers and duties as deputy.
2. Select an Approved Provider: The Office of the Public Guardian (OPG) provides a list of approved bond providers.
3. Apply for the Bond: Provide details of the protected person, the deputy(s), the bond amount, and pay the premium.
4. Notify the Court/OPG: Once the bond is confirmed, provider notifies the Court or the Office of the Public Guardian so the sealed order can be issued, and you can act.
5. Maintain the Bond: Pay any annual premiums on time, keep records of payment, monitor whether the estate value or the scope of powers changes, which may trigger a review of the bond.
6. On Deputyship End or Protected Person’s Death: Seek court discharge of the deputyship and bond. Note that even after death, the bond may need to remain in force for a period.

Why Working with a Specialist Solicitor Helps

Arranging and managing a deputyship involves complex duties, statutory obligations, and risk. A specialist solicitor experienced in deputyships and the Court of Protection can help you:

• Interpret and comply with the deputyship order.
• Select and arrange the correct security bond.
• Ensure ongoing compliance (annual reports, supervision fees, record-keeping)
• Deal with changes (estate growth, change of deputy, discharge of deputyship)
• Mitigate personal risk and provide reassurance to the protected person’s family.

If you are acting as a deputy, or considering applying to become one, and would like tailored advice on security bonds, deputyship obligations or Court of Protection applications, our team of specialist solicitors are here to help.