Ask Dr. Don By Don Taylor, Ph.D., CFA • Bankrate.com

Using 'payable on death' to avoid probate

Dear Dr. Don,
To avoid probate, can my husband and I purchase a Series EE U.S. savings bond in both our names and put "upon death" on it so it can go directly to a child?
Mae Mortal

Dear Mae,
You can have a savings bond held in both of your names that includes a "payable on death" notation.

That will effectively eliminate the need for the savings bond to be included in probate, although the proceeds would still be included in your estate after your deaths.

See the Bureau of Public Debt's Web pages, Death of a Bond Owner and What to Do When a Bond Owner Has Died.

Not all states have passed "payable on death" or "transfer on death" laws. If your state doesn't have such a law then I'm uncertain how a financial obligation of the federal government is treated under state law and you'd want to review this decision with your attorney.

The map below shows states that have passed such laws:

Source: Kiplinger.com

This USA Today article has more on "payable on death" accounts and when you should consider using them to transfer ownership of bank accounts, savings bonds and U.S. Treasury securities upon the death of the owner.