Inherited Savings Bonds

Tuesday, December 28th, 2004
Categorized as: Inheriting and bequeathing US Savings Bonds

I am being appointed executor of my sister’s estate. It consists of Series E and EE bonds. Some quit drawing interest ranging from 1996 to the present. Others will expire in 2005 and later. The estate is to be split 50/50 between my brother and me. We are both retired and in the 15% tax bracket. An accountant has recommended dividing the bonds and cashing a few at a time over future years. I would appreciate your suggestions.

Tom’s response

The bonds that have stopped earning interest might pose some problems for you. You won’t be able to update the registration on those. In addition, your sister owed income tax on those in the year they stopped paying interest.

I think you should look at cashing those bonds now. You can actually split the resulting interest income three ways – you and your brother can each declare some and you can put some on your sister’s final tax return.

This will allow you to reinvest this money and start earning interest on it again. Although everyone hates to pay taxes, losing the interest is actually even more costly, since you’re going to have to pay the tax someday no matter what you do, but there’s no way to go back in time and collect back interest you’ve missed.

As for the bonds that are still earning interest, I agree with your accountant. Redeem them in amounts that will keep you in the 15% bracket and that won’t make your social security income taxable.

Rate this post (1 to 5 stars):  1 Star2 Stars3 Stars4 Stars5 Stars
(Average rating: 3.33 stars)

FDIC Insured Certificates of Deposit can pay 1 or 2% more than savings bonds when held for a similar length of time. See top CD Rates Below:


On February 28th, 2005 Anonymous said:

What if the person who is the remaining co-owner is in a higher tax bracket (still working full time) than the decedent who had limited income? Would it be better for the decedent to pay the tax?

On March 3rd, 2005 Tom Adams said:

Yes, it can be better to pay the tax due on the decedent’s final tax return.

Here are the issues to consider. How long will it be until the co-owner is in a lower tax bracket? Will the bonds still be paying interest then? There’s also the issue of the double taxation trap, which I discuss in my book.

On March 7th, 2005 Anonymous said:

Thank you. I am enjoying your book now.

Comments Closed

June 1, 2010

After six years, over 400 posts, 3,680 real comments, and over 90,000 spam comments (thank you, Akismet, for making managing a blog with comments possible), I am closing public comments on I will contine to update the main articles on this site, but not the comments.

Virtually every question about Savings Bonds has been asked and answered on this site multiple times. Use the search feature (see the box in the gray area near the top of this page) or the detailed menu on the lower part of the home page to find the information you're looking for. If you have a copy of Savings Bond Advisor, you can ask me a question here.

Tom Adams

Savings Bond Calculator


Savings Bond

Get an answer to your questions from the Treasury's Savings Bonds team.

Click below to ask a question.

Ask the Treasury


Invest online in Savings Bonds or
marketable Treasury securities.

Deal directly with the U.S. Treasury.

More info


Log in