question about savings bonds


J

Jane

I have over 100K in US Savings Bonds. They are in my name and my
husband. My husband recently died. I don't want to cash them because
of the tax ramifications and also because most of the bonds are
getting > 5%. I was told I cannot make any name changes, that to do
that I would have to sell and repurchase.

Can these bonds be put into a trust? I'm not sure of the terminology,
but I mean the kind of trust that protects assets from probate not the
kind that protects them from Medicaid.

Help would be greatly appreciated.

Thanks

Jane
 
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D

dapperdobbs

I have over 100K in US Savings Bonds.  They are in my name and my
husband.  My husband recently died.  I don't want to cash them because
of the tax ramifications and also because most of the bonds are
getting > 5%.  I was told I cannot make any name changes, that to do
that I would have to sell and repurchase.

Can these bonds be put into a trust?  I'm not sure of the terminology,
but I mean the kind of trust that protects assets from probate not the
kind that protects them from Medicaid.

Help would be greatly appreciated.

Thanks

Jane
Sorry for your loss. The link below is to a tax forum that handles
some fairly technical matters:

http://groups.google.com/group/misc.taxes.moderated/topics?hl=en&lnk=srg

Ask for links to read more about the issues you are addressing. As far
as I know, there is no need to retitle the bonds (make copies of your
late husband's death certificate just in case), and if they pay >5%
that's good in today's environment. Trusts can be complicated, and I'd
be sure about the costs before going with one - not that they aren't
good and useful.
 
Y

YvonneD

Thanks, I will.
Sorry for your loss. The link below is to a tax forum that handles
some fairly technical matters:

http://groups.google.com/group/misc.taxes.moderated/topics?hl=en&lnk=srg

Ask for links to read more about the issues you are addressing. As far
as I know, there is no need to retitle the bonds (make copies of your
late husband's death certificate just in case), and if they pay >5%
that's good in today's environment. Trusts can be complicated, and I'd
be sure about the costs before going with one - not that they aren't
good and useful.
 
M

Mark Freeland

Jane said:
I have over 100K in US Savings Bonds. They are in my name and my
husband. My husband recently died. I don't want to cash them because
of the tax ramifications and also because most of the bonds are
getting > 5%. I was told I cannot make any name changes, that to do
that I would have to sell and repurchase.
As heir/beneficiary, you can have the bonds reissued in your own name
without selling/repurchasing. You don't have to pay taxes on them at the
time (though you have that option, see below). Further, you can add a new
co-owner or beneficiary. That's form PD F 4000. If you add a co-owner or
beneficiary, then the bonds won't go through probate when you die.

(Editorial comment - unless there are no assets that pass through will, or
the estate is extremely small, an estate will have to be probated. Adding
savings bonds to the probate estate can have an impact on the court costs,
but may not, depending on state and size of estate. All assets of the
deceased, whether probated or not, are considered part of the gross estate
for estate tax purposes. Thus, IMHO, the benefits of reducing the probate
estate are in many cases vastly overstated. However, in the case of
savings bonds, because of their peculiar ability to defer income, not
estate, taxes when passed to a beneficiary/co-owner, you will likely want to
reissue the bonds.)

Tax consequences - while you make it clear that you don't want to pay taxes
on the bonds now, you should be aware that this is an option (e.g. to reduce
the size of the estate). Taxes due on savings bonds at time of death can be
paid by the deceased on the final income tax return, without selling the
bonds. That allows you to keep the 5% rate and reduce future tax liability.
You don't have to pay the taxes, but it is an option - the paying of taxes
and the selling of bonds are thus somewhat decoupled. (Of course if you
redeem the bonds, then you must pay the taxes due.)

This is all spelled out clearly by the Treasury Dept:
http://www.treasurydirect.gov/indiv/research/indepth/ebonds/res_e_bonds_eedeath.htm
(options on retitling i.e. reissuing)
http://www.savingsbonds.gov/indiv/research/indepth/ebonds/res_e_bonds_eetaxconsider.htm
(tax impacts of reissued bonds)

BTW, the Treasury Dept. is very helpful - I recently emailed them asking how
to both reregister and convert to electronic form in one transaction (their
website seemed to only describe how to reregester paper to paper, and how to
convert to electronic form - which would mean a two-step process), and they
emailed back a short, clear set of instructions (yes, using PD F 4000).

Mark Freeland
(e-mail address removed)
 
B

BreadWithSpam

Jane said:
I have over 100K in US Savings Bonds. They are in my name and my
husband. My husband recently died. I don't want to cash them because
Can these bonds be put into a trust? I'm not sure of the terminology,
but I mean the kind of trust that protects assets from probate not the
kind that protects them from Medicaid.
It may depend on how the account is titled. If it's treated
like a bank account and it's co-owned, it may be frozen until
the executor of the estate clarifies it for the bank. If it's
joint tenants with right of survivorship (JTWROS), then it
passes to the surviving owners *outside* of probate.

If they're paying a good rate, you're probably best off just
leaving them alone. But in the meantime, check into exactly
how they are titled.
 
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B

BreadWithSpam

Jane said:
I have over 100K in US Savings Bonds. They are in my name and my
husband. My husband recently died. I don't want to cash them because
[ignore my previous post - I read "savings bonds" but I
was thinking "bank account or CDs" while I was typing.]

See Mark Freeland's excellent response for the correct
answer.

Sorry about that.
 
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