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Dr. Don Taylor, CFA, Bankrate.com advice columnist Cashing savings bonds after owner dies

Dear Dr. Don,
My mother passed away. She had saving bonds that she kept at home, and my sister took them. We don't know the value of the saving bonds, but I have four other sisters and brothers and we don't know if my sister intends to send everyone their share of the bonds upon redemption. Can she cash the bonds and not share the proceeds?
-- William Whereabouts

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Dear William,
There's a protocol established by the U.S. Treasury in redeeming bonds owned by the decedent. Decedent is the legal term for the person who has died. How they can be redeemed is determined by whether the decedent was the sole owner on the bond.

Those rules, as described in the Treasury Direct publication, "Death of a Savings Bond Owner" are summarized below.

Rules for cashing savings bonds after owner dies:
If only one person is named on a savings bond, and that person is deceased, the bond becomes the property of the person's estate.
If both people named on a bond are deceased, the bond is the property of the estate of the person who died last.
If one of two people named on a bond is deceased, the surviving person is automatically the owner as if that survivor had been the sole owner from the time the bond was issued.

This publication also describes what happens if a surviving person is named on a bond, there's no survivor named on a bond, the estate is being settled under special provisions of state law relating to small estates and the potential taxes due after death.

It's also possible for savings bonds to have been registered with a sole owner, the decedent, but have a payable on death election. If your mother had elected the bonds to be payable on death, then the bonds with this election have a beneficiary. A page on the Treasury Direct Web site discusses registration possibilities in greater depth.

You didn't mention if when your mother passed she had a will, who was the executor of that will, if the estate was in probate, etc., so I can't tell if your concern about whereabouts of the savings bond proceeds is premature or precautionary. I recommend that you talk to your sister. Ask her about how the bonds are registered and what will happen with the proceeds. That lets her know that you, and your siblings, didn't forget about this potential legacy.   

To ask a question of Dr. Don, go to the "Ask the Experts" page, and select one of these topics: "financing a home," "saving & investing" or "money."

Bankrate.com's corrections policy-- Posted: March 12, 2007
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