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Dear Dr. Don,
I have a $30,000 I Bond maturing in two days. Should I cash it out and put it into a certificate of deposit? I'm 73 and don't want to have it invested in the I bond at death only to have it go into my estate.
-- Peggy Pecuniary
 Dear
Peggy,
I'm confused about what you own. I'm going to assume that it's a Series I savings bond.
The Treasury started issuing Series I savings bonds in 1998. Since these savings bonds have a 30-year maturity, a Series I savings bond isn't going to mature in 2007.
The Treasury has issued Treasury
Inflation-Protected Securities, or TIPS, since
1997, but the 10-year TIPS issued in 1997 would
have matured in January 2007, not December 2007.
The 1998 TIPS are maturing on Jan. 15, 2008. Since
you wrote your message in December, this isn't
likely to be your issue either. These securities
don't reinvest into new maturities without some
action on your part.
If you redeem Series I savings bonds within the first five years, you'll forfeit the three most recent months' interest; after five years, you won't be penalized. So after five years, you can cash out and move the money without penalty, although you will owe taxes on the interest earnings.
If you own a Series I savings bond
that won't mature for another 20-plus years, you
can reissue the bond to make it payable on death,
or POD, to a beneficiary. That won't keep it out
of your estate, but it should keep it out of probate.
In some cases, the reissuance creates a reportable
event for federal income tax purposes. See "Series
I Savings Bonds Tax Considerations" for more
details. A CD can also be set up as a POD account.
Talk to your attorney or your tax
professional about the bigger picture here. Moving
from a Treasury security to a CD isn't going to
keep the money out of your estate. From an investment
perspective, it may or may not make sense to cash
in the bond, depending on when you bought your
Series I savings bond and its current yield.
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