Savings Bond registration and possession basics
Tuesday, June 8th, 2004
Categorized as: Savings Bond registration changes • Savings Bonds as gifts and prizes
My aunt has given me eight Savings Bonds. As I am the beneficiary of her gift, does she have to die before I can cash them?
Being the beneficiary of her gift isn’t the same thing as being the beneficiary on the Savings Bond registration, which is what’s important.
Look at the name or names on each of the bonds. If a bond lists a Mail to: name, ignore it. That only shows who the bond was mailed to and means nothing in terms of ownership.
If there is just one name, that bond has what’s called a sole-owner registration. Only that person can cash the bond. When a sole-owner dies, the bonds are distributed according to the person’s will, or by state or federal law if there is no will.
If your aunt gave you bonds which are registered only in her name, she hasn’t legally given you anything. Before her death, she’s the only one who can cash them. After her death, her will or state law will determine who will own the bonds. In this case, the fact that you have possession of the bonds is legally meaningless.
If there are two names separated by OR, that bond has a co-owner registration. Either co-owner can cash the bond without the permission of the other. However, the IRS says the income tax on the interest earned by the bond should be paid by the principal owner, which it defines as the person who put up the money to buy the bond.
If your aunt gave you bonds which list both your names as co-owners, you can cash the bonds whenever you like. However, you many want to check with her on the tax issue, as most people don’t realize the tax implications of co-owner gift bonds.
If one of you dies, the bond will belong to the other and becomes like a sole-owner bond unless the registration is updated.
If there are two names separated by POD, that bond has a beneficiary registration. POD means payable on death. The first person named is the owner and the second is the beneficiary. The beneficiary has no ability to cash the bond unless the owner dies.
If your aunt gave you bonds on which she is the registered owner and you are the beneficiary, when she dies the bond becomes a sole-owner bond registered in your name. You can keep it as is, you can have the registration updated, or you can redeem it. You will need a copy of her death certificate to change the registration or to redeem it.
So the answer to your question, does she have to die before I can cash them?, is maybe, maybe not, or maybe you’ll never be able to cash them. It all depends on how they are registered. The fact that you have possession of the bonds is legally meaningless.