About Tom Adams Expertise I can answer questions about US Savings Bonds - current value, current interest rates, how to get them redeemed, what to do if they are lost or stolen, how to buy them online, etc...
Experience Experience in the area I am the author of the best-selling book about Savings Bonds,
Savings Bond Advisor.
Expert: Tom Adams Date: 12/12/2007 Subject: Re-register savings bonds issued in Trust name
Question QUESTION: Tom - husband and wife had savings bonds issued in the name of their Family (i.e. Living) trust. Husband passed away. May the surviving wife have the Bonds reissued in her name without causing a taxable event? If so, then which Form should be used.
If she can not reissue in her name without causing a taxable event, is there anything you would recommend she do before her death? My concern is that the bonds will need to be redeemed upon her passing in order to have them pass from the Trust to the beneficiaries.
ANSWER: Hi Mike - Is it possible? Yes. Is it wise? I don't know.
You need to consult with the lawyer who set up the Living Trust. Usually these are set up to save estate taxes. Estate taxes typically come into play when the second spouse dies, not the first one.
So it sounds like you may be trying to undo someone's careful estate planning. Or maybe it wasn't so careful. I don't know. But you need some professional advice on this.
If you decide to change them, it should be a tax-free event. Here's the form you'd need:
I am not concerned about the Estate planning for the bonds as the amount of bonds registered in the Trust's name is not that much (i.e. $50,000).
My concern is that if the bonds are left registered under the Living Trust's name, then when the wife passes away, the bonds will need to be redeemed and will not be able to be re-registered by the two (son and daughter) remaining beneficiaries of the Trust. That is, all interest on the bonds upto the wife's date of death will taxed at her date of death and will not be able to be postponed by the beneficiares.
ANSWER: Hi Mike - if the bonds were handled as you fear, it would be because the Trust documents require it, not because Savings Bond regulations require it.
At any rate, you can have the bonds changed to wife's name, POD child, using the form I mentioned earlier.
Note that the Trustee named in the Savings Bond registration has to sign for the trust.
If more than one person is named as Trustee and the word AND appears between their names, both have to sign; if one has died, you'll need to provide a death certificate.
Let me know if you need any more help with this.
Tom Adams
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QUESTION: Thanks again for your response.
Are you then saying that when the wife passes away, the son/daughter beneficiaries of the Living Trust will be able to change the registration of the bonds from the Trust to themselves without accelerating the taxability of the accrued interest income? That is, the Trust will be able to pass out the bonds to the remaining beneficiaries, and they will be able re-register them and not report the interest income income until they redeem the bonds.
Answer Hi Mike - If there was no Trust, then I could tell you without any doubt that transferring bonds from a deceased person to her heirs would not be a taxable event.
The fact that there's a Trust inserts a bit of doubt into the situation - in part because it may depend on what the Trust paperwork says.
But I've never heard of a case where a registration change from a deceased person's name was treated as a taxable event.
