I Bonds - How Your Spouse can Quickly Cash in I Bonds

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patrickscott
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I Bonds - How Your Spouse can Quickly Cash in I Bonds

Post by patrickscott » Sat Aug 31, 2019 10:44 am

Greeting,

The other day, as I was musing about taxes and my/our electronic I Bonds, I suddenly realized that should I die before 2030 (when most of the bonds will mature), my widow will have to, for tax reason, surrender/cash in most of the I Bonds as quickly as possible in the year of my death since in the year of my death she can still file a joint return, but in the year after my death she will have to file as a single person.

Even worse, are her options if I procrastinate and decide to die late in the year, e.g., on Dec 29?

My first thought was that she could simply log into my TD account and surrender/cash in all the I Bonds. I called TreasuryDirect and was told only the account holder (me) can log into my TD account and surrender/cash in the I Bonds.

The very helpful lady I spoke with, suggested that I give 'Transact Rights' to my wife and then my wife/widow could immediately surrender/cash in my I Bonds at any time, before or after my death. (Of course, this is not recommended if you are in the process of getting divorced. :D )

I am in still the process of giving my wife 'Transact Rights', which, if you have as many small amount I Bonds as I have, is a slow process. Once I have given 'Transact Rights' to all my I Bonds, I will have my wife cash one in to see how long it takes to get the funds.

As best as I could, I have outlined the steps involved:

Spouse's TreasuryDirect Account (This must be done first)

1. If your spouse has no TreasuryDirect account, have her create one even if she is not going to buy any bonds.
2. Copy/Write her her newly created Treasury Direct account number (You will have to copy & paste it in repeatedly, later.)

Your TreasuryDirect Account

1. Log in to TreasuryDirect
2. Click on ManageDirect (top, horizontal blue bar). Now ManageDirect is orange.
3. Click on, under Manage My Securities, 'Assign View or Transact rights'.
4. Select, Under Savings Bonds, Series I Savings Bond (I only have I Bonds)
5. Click on Submit

You should now see the Summary page with all your I Bonds listed.

You can only Assign Rights to your spouse one I Bond at a time.

You cannot assign rights to I Bonds that are shown as POD (Your only option is 'You may grant View rights to the beneficiary'.)

1. Print (I strongly recommend printing) your Summary page to make it easier to keep track of which I Bonds you have already processed/assigned rights to your spouse.
(Unfortunately, I bought our paper I Bonds in very small denominations --now all my I Bonds are electronic I Bonds; thus, ending up with several pages of electronic I Bonds that I now have to 'Assign Rights' to, one I Bond at a time.

We found that it is much easier to have both of us doing this together to keep track of I Bonds being processed.)

2. Select the radio button for the I Bond you want to assign rights to your spouse.
3. Click on Add (not Edit)
4. Paste/Write Grantee's TreasuryDirect Account # in the text box
5. Select 'Transact rights' radio button (unless you only want to grant 'View rights' only). NOTE: The default is 'View rights'.

You should now be back at the Summary page.

1. Select the next I Bond you want to Assign Rights to.
2. Repeat the above steps.


Back to Spouse's Treasury Direct Account

1. Have your spouse log into her/his account.
2. Click on ManageDirect (top, horizontal blue bar). Now ManageDirect is orange.
3. Click on, under Manage My Shared Securities, 'Access Securities'
4. Select Grantor radio button
5. Click on Submit and you will see the I Bonds she has been given Transact rights to.
6. Print it.
7. Check, using your previously printed Summary from your account, to see if (a) all the I Bonds have been processed, and (b) if all the I Bonds you processes show 'Transact'.

By comparing the two records, we found that we had skipped one I Bond and given Transact rights to a, we thought, yet to be processed I Bond.

I hope this helps somebody... or if it isn't needed, please let me know!

Let me know if you have any questions.

Have a great, cool day.

Pat

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Re: I Bonds - How Your Spouse can Quickly Cash in I Bonds

Post by bsteiner » Sat Aug 31, 2019 1:30 pm

Or she and your executor can accrue the interest on her and your joint return for the year of your death.

Or your executor might accrue the interest on the estate’s income tax return and offset the income with estate administration expenses.

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Watty
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Re: I Bonds - How Your Spouse can Quickly Cash in I Bonds

Post by Watty » Sat Aug 31, 2019 1:55 pm

patrickscott wrote:
Sat Aug 31, 2019 10:44 am
I suddenly realized that should I die before 2030 (when most of the bonds will mature),
If you bought the I Bonds in 2000 or before they likely have a fixed rate of well over 3%.

That might be worth keeping even with the tax implications if she could be getting that 3% for at least a few years.

If she will not need the money then she might also be able to use the iBonds to pay for grandkids college to get the tax advantages. I don't recall the details you should also look at rolling the iBonds into a 529 or Coverdell college savings plan to see if that would be an good choice for what to do with the iBonds.

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Re: I Bonds - How Your Spouse can Quickly Cash in I Bonds

Post by Munir » Sat Aug 31, 2019 1:58 pm

My wife died last year. We had I-bonds registered in her name only on the assumption that I will die first. I was her sole heir and was able to cash the I-bonds thru my bank which also helped me with all the paperwork in dealing with the Feds. What I neglected to do was to have a federal withhold on the high appreciation which was all interest/dividend. I ended up with a whopping Federal tax due at tax time in addition to a small penalty for underwithholding. The moral of the story is not to forget to withhold federal taxes at the time you cash I-Bonds.

I don't know what is easier to do- follow the process the OP is recommending or do what I did.

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KlingKlang
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Re: I Bonds - How Your Spouse can Quickly Cash in I Bonds

Post by KlingKlang » Sat Aug 31, 2019 2:07 pm

Munir wrote:
Sat Aug 31, 2019 1:58 pm
My wife died last year. We had I-bonds registered in her name only on the assumption that I will die first. I was her sole heir and was able to cash the I-bonds thru my bank which also helped me with all the paperwork in dealing with the Feds. What I neglected to do was to have a federal withhold on the high appreciation which was all interest/dividend. I ended up with a whopping Federal tax due at tax time in addition to a small penalty for underwithholding. The moral of the story is not to forget to withhold federal taxes at the time you cash I-Bonds.

I don't know what is easier to do- follow the process the OP is recommending or do what I did.
Since you were able to redeem your I bonds at the bank they must have been paper I bonds.

The OP's I bonds are held electronically at Treasury Direct.

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Re: I Bonds - How Your Spouse can Quickly Cash in I Bonds

Post by ThriftyPhD » Sat Aug 31, 2019 2:10 pm

Munir wrote:
Sat Aug 31, 2019 1:58 pm
My wife died last year. We had I-bonds registered in her name only on the assumption that I will die first. I was her sole heir and was able to cash the I-bonds thru my bank which also helped me with all the paperwork in dealing with the Feds. What I neglected to do was to have a federal withhold on the high appreciation which was all interest/dividend. I ended up with a whopping Federal tax due at tax time in addition to a small penalty for underwithholding. The moral of the story is not to forget to withhold federal taxes at the time you cash I-Bonds.

I don't know what is easier to do- follow the process the OP is recommending or do what I did.
The benefit of assigning Transact Rights as outlined in the OP is that if you are alive but incapacitated, Transact Rights would allow your spouse access to the money. Without Transact Rights, your spouse would not have access to the money until your death (or the establishment of some sort of guardianship I suppose).

If you use I-bonds as part of an emergency fund, your spouse might need to access them in an emergency. Transact Rights seem to be the way to go in a lot of situations.

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Re: I Bonds - How Your Spouse can Quickly Cash in I Bonds

Post by nisiprius » Sat Aug 31, 2019 2:14 pm

I'm in a similar situation but I gave up. We're keeping our co-owned paper bonds from the Good Old Days, but redeeming all of our electronic bonds, because of this very issue.

There is no true "co-ownership" in electronic bonds in Treasury Direct, and I just could not assure myself that "secondary owner with transact rights" amounts to exactly the same thing.

Everything was registered

Registration: Him, His SSN
WITH
Her, Her SSN
Rights: Transact
Grantee: Her

Bank info: TheirJointCheckingAccount


I assumed that with such a registration, a widow could immediately redeem these bonds after her husband's death. But when I asked some specific questions about this, I ended up feeling very doubtful.

For paper bonds that are "co-owned," the answer was clearly yes.

For electronic bonds with her as "secondary owner with transact rights," I just wasn't sure. Before his death, yes. Afterwards? Unclear.

Now, as a practical matter, I think it is likely that a widow would find that if they logged in within a short time of their spouse's death, they they actually could redeem the bond, and it would actually get paid into the joint checking account.

But I'm not at all sure that this is strictly legal.

When I contacted Treasury Direct to ask about this specific situation, they said that the surviving spouse is supposed to contact Treasury Direct, provide them with a mailed, signed, paper form and a death certificate and so on, and that they would then transfer the bonds into her account. That is, she would need to go through the usual formalities.

If you can manage to get something in writing from Treasury Direct confirming that a widow, registered as secondary owner with transact rights, really can redeem electronic bonds in her husband's account.
Last edited by nisiprius on Sat Aug 31, 2019 2:29 pm, edited 5 times in total.
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Munir
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Re: I Bonds - How Your Spouse can Quickly Cash in I Bonds

Post by Munir » Sat Aug 31, 2019 2:16 pm

ThriftyPhD wrote:
Sat Aug 31, 2019 2:10 pm
Munir wrote:
Sat Aug 31, 2019 1:58 pm
My wife died last year. We had I-bonds registered in her name only on the assumption that I will die first. I was her sole heir and was able to cash the I-bonds thru my bank which also helped me with all the paperwork in dealing with the Feds. What I neglected to do was to have a federal withhold on the high appreciation which was all interest/dividend. I ended up with a whopping Federal tax due at tax time in addition to a small penalty for underwithholding. The moral of the story is not to forget to withhold federal taxes at the time you cash I-Bonds.

I don't know what is easier to do- follow the process the OP is recommending or do what I did.
The benefit of assigning Transact Rights as outlined in the OP is that if you are alive but incapacitated, Transact Rights would allow your spouse access to the money. Without Transact Rights, your spouse would not have access to the money until your death (or the establishment of some sort of guardianship I suppose).

If you use I-bonds as part of an emergency fund, your spouse might need to access them in an emergency. Transact Rights seem to be the way to go in a lot of situations.
What you say makes sense. I did not know that "Transact Rights" existed.

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Re: I Bonds - How Your Spouse can Quickly Cash in I Bonds

Post by nisiprius » Sat Aug 31, 2019 2:27 pm

P.S. Another factor to consider, by the way, is that the Treasury Direct website is clunky. The bonds that are in someone else's account don't show up the way you'd expect, you have to go to some other screen that's not at all obvious.

Also, the site constantly forgets my computer and won't let me log in until it emails me a one-time password.

This means that if you expect a spouse to be able to manage things, I think it is really necessary have her literally practice the procedure, all the way down to actually redeeming, say, $10 from the account. That is, you need to be in a different room but within shouting distance, and ask your spouse to try to log in and redeem $10 from the account. Keep in mind that your spouse needs to have a working email address to receive the one-time password, in case it insists on requiring one, and needs to keep it updated if they change email addresses.
Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness; Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.

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Re: I Bonds - How Your Spouse can Quickly Cash in I Bonds

Post by Leif » Sat Aug 31, 2019 2:28 pm

I have paper I & E bonds. I don't have a local bank. I bank through Fidelity. When I asked if they can process these they told me no. I was surprised. So, my plan is to open a savings account at a local bank long enough to deposit the bonds. Then close the account and get a check to deposit with Fidelity. I will have 2 groupings of bond redemptions. One next year and the next in 2023. I guess I can repeat the same process in 2023. I could set up a treasury direct account, but I'm nervous about mailing in the bonds and it seems like it is too much trouble for what I need to do.

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Re: I Bonds - How Your Spouse can Quickly Cash in I Bonds

Post by Munir » Sat Aug 31, 2019 2:29 pm

Another option is that if there are some warnings of an impending death of the bondholder, then transfer the ownership to the "healthy" spouse while both spouses are alive. However, depending on the familial circumstances, this may or may not be appropriate for social reasons e.g. surviving spouse saying "hello dear, since you are going to die soon, I want you to sign over these bonds to me now".

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Re: I Bonds - How Your Spouse can Quickly Cash in I Bonds

Post by tibbitts » Sat Aug 31, 2019 2:34 pm

I'm not sure what the problem is in the original scenario. Yes, single rates are higher, but income might be reduced in other ways in years following death (earned income, social security, pensions, etc. etc.) Not to mention the issue of the benefits of keeping the bonds and redeeming and paying taxes over time possibly outweighing the tax implications.

As for the legality of a surviving spouse making changes in a TD (or some other account), are there actually examples of such changes being reversed or "clawed back" where no malicious intent or conflicts (no other claims to the account, etc.) have existed? Obviously TD will correctly tell you that such changes aren't allowed.

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Re: I Bonds - How Your Spouse can Quickly Cash in I Bonds

Post by patrickscott » Sun Sep 01, 2019 10:51 am

bsteiner wrote:
Sat Aug 31, 2019 1:30 pm
Or she and your executor can accrue the interest on her and your joint return for the year of your death.

Or your executor might accrue the interest on the estate’s income tax return and offset the income with estate administration expenses.
-----------

Thanks for your reply. Unfortunately, I don't understand your answer.

Is there an easy way that she, my widow (there will be no executor or estate), can quickly have Treasury Direct calculate the accrued interest in the year of death?

Is there a way to keep the I Bonds and just pay off the accrued interest in the year of death? The only options I see is to pay the taxes yearly or at time of I Bond surrender.

Thanks again!

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patrickscott
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Re: I Bonds - How Your Spouse can Quickly Cash in I Bonds

Post by patrickscott » Sun Sep 01, 2019 10:56 am

Watty wrote:
Sat Aug 31, 2019 1:55 pm
patrickscott wrote:
Sat Aug 31, 2019 10:44 am
I suddenly realized that should I die before 2030 (when most of the bonds will mature),
If you bought the I Bonds in 2000 or before they likely have a fixed rate of well over 3%.

That might be worth keeping even with the tax implications if she could be getting that 3% for at least a few years.

If she will not need thGe money then she might also be able to use the iBonds to pay for grandkids college to get the tax advantages. I don't recall the details you should also look at rolling the iBonds into a 529 or Coverdell college savings plan to see if that would be an good choice for what to do with the iBonds.
-------------

Thanks for your reply. Grandkids already have modest educational funds set up. Is it possible to roll the iBonds into a 529 or Coverdell college savings plan without cashing the I Bonds and paying taxes on them?

Thanks.

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patrickscott
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Re: I Bonds - How Your Spouse can Quickly Cash in I Bonds

Post by patrickscott » Sun Sep 01, 2019 11:01 am

P.S. Another factor to consider, by the way, is that the Treasury Direct website is clunky. The bonds that are in someone else's account don't show up the way you'd expect, you have to go to some other screen that's not at all obvious.

Also, the site constantly forgets my computer and won't let me log in until it emails me a one-time password.
nisiprius wrote:
Sat Aug 31, 2019 2:27 pm
This means that if you expect a spouse to be able to manage things, I think it is really necessary have her literally practice the procedure, all the way down to actually redeeming, say, $10 from the account. That is, you need to be in a different room but within shouting distance, and ask your spouse to try to log in and redeem $10 from the account. Keep in mind that your spouse needs to have a working email address to receive the one-time password, in case it insists on requiring one, and needs to keep it updated if they change email addresses.
Thanks for your reply. Once we finish processing the I Bonds, my wife, on her own, is going to cash in one small I Bonds. I will post how long it takes to receive payment in the bank.

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Re: I Bonds - How Your Spouse can Quickly Cash in I Bonds

Post by patrickscott » Sun Sep 01, 2019 11:05 am

Munir wrote:
Sat Aug 31, 2019 2:16 pm
ThriftyPhD wrote:
Sat Aug 31, 2019 2:10 pm
Munir wrote:
Sat Aug 31, 2019 1:58 pm
My wife died last year. We had I-bonds registered in her name only on the assumption that I will die first. I was her sole heir and was able to cash the I-bonds thru my bank which also helped me with all the paperwork in dealing with the Feds. What I neglected to do was to have a federal withhold on the high appreciation which was all interest/dividend. I ended up with a whopping Federal tax due at tax time in addition to a small penalty for underwithholding. The moral of the story is not to forget to withhold federal taxes at the time you cash I-Bonds.

I don't know what is easier to do- follow the process the OP is recommending or do what I did.
The benefit of assigning Transact Rights as outlined in the OP is that if you are alive but incapacitated, Transact Rights would allow your spouse access to the money. Without Transact Rights, your spouse would not have access to the money until your death (or the establishment of some sort of guardianship I suppose).

If you use I-bonds as part of an emergency fund, your spouse might need to access them in an emergency. Transact Rights seem to be the way to go in a lot of situations.
What you say makes sense. I did not know that "Transact Rights" existed.
Thanks! I had not thought of being alive but incapacitated... One more reason to give my wife "Transact Rights."

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Re: I Bonds - How Your Spouse can Quickly Cash in I Bonds

Post by IngognitoUSA » Sun Sep 01, 2019 11:10 am

A little off topic, but do joint i bonds show up on both accounts. I don’t want to count them twice in my net worth calculations.

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patrickscott
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Re: I Bonds - How Your Spouse can Quickly Cash in I Bonds

Post by patrickscott » Sun Sep 01, 2019 11:23 am

nisiprius wrote:
Sat Aug 31, 2019 2:14 pm

When I contacted Treasury Direct to ask about this specific situation, they said that the surviving spouse is supposed to contact Treasury Direct, provide them with a mailed, signed, paper form and a death certificate and so on, and that they would then transfer the bonds into her account. That is, she would need to go through the usual formalities.

If you can manage to get something in writing from Treasury Direct confirming that a widow, registered as secondary owner with transact rights, really can redeem electronic bonds in her husband's account.

Thanks for your reply. I will try to get something in writing from Treasury Direct, after we finish processing the I Bonds and cashing one in.

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Re: I Bonds - How Your Spouse can Quickly Cash in I Bonds

Post by Gill » Sun Sep 01, 2019 11:26 am

patrickscott wrote:
Sun Sep 01, 2019 10:51 am
bsteiner wrote:
Sat Aug 31, 2019 1:30 pm
Or she and your executor can accrue the interest on her and your joint return for the year of your death.

Or your executor might accrue the interest on the estate’s income tax return and offset the income with estate administration expenses.
-----------

Thanks for your reply. Unfortunately, I don't understand your answer.

Is there an easy way that she, my widow (there will be no executor or estate), can quickly have Treasury Direct calculate the accrued interest in the year of death?

Is there a way to keep the I Bonds and just pay off the accrued interest in the year of death? The only options I see is to pay the taxes yearly or at time of I Bond surrender.

Thanks again!
It's really quite simple. In the preparation of the joint tax return for the year of death you report all the accrued interest on the bonds. That is the difference between their value at year end and the original cost. No need to cash in the bonds or do anything else. All you need to determine is their redemption value which can be easily done from the Website treasurydirect.gov. Your wife would keep the bonds and then report the accrued interest each year in the same manner.

Gill
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Re: I Bonds - How Your Spouse can Quickly Cash in I Bonds

Post by patrickscott » Sun Sep 01, 2019 11:32 am

Munir wrote:
Sat Aug 31, 2019 2:29 pm
Another option is that if there are some warnings of an impending death of the bondholder, then transfer the ownership to the "healthy" spouse while both spouses are alive. However, depending on the familial circumstances, this may or may not be appropriate for social reasons e.g. surviving spouse saying "hello dear, since you are going to die soon, I want you to sign over these bonds to me now".
Thanks for your reply. Of course, if there is some advanced warning, we (or she alone with some help) would be able to calculate the tax consequences and cash in the logical amount of I Bonds.

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Re: I Bonds - How Your Spouse can Quickly Cash in I Bonds

Post by patrickscott » Sun Sep 01, 2019 11:35 am

Thanks to all that replied. I will post again after my wife cashes in a 'Transfer Rights' I Bond from her treasury account.

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Re: I Bonds - How Your Spouse can Quickly Cash in I Bonds

Post by cas » Sun Sep 01, 2019 11:44 am

patrickscott wrote:
Sun Sep 01, 2019 10:51 am
bsteiner wrote:
Sat Aug 31, 2019 1:30 pm
Or she and your executor can accrue the interest on her and your joint return for the year of your death.

Or your executor might accrue the interest on the estate’s income tax return and offset the income with estate administration expenses.
-----------

Thanks for your reply. Unfortunately, I don't understand your answer.

Is there an easy way that she, my widow (there will be no executor or estate), can quickly have Treasury Direct calculate the accrued interest in the year of death?

Is there a way to keep the I Bonds and just pay off the accrued interest in the year of death? The only options I see is to pay the taxes yearly or at time of I Bond surrender.

Thanks again!
For more information, see: IRS Publication 550, p. 8- 9. https://www.irs.gov/pub/irs-pdf/p550.pdf (Publication 550 "Investment Income" - "Savings Bonds" -> "Decedents" -> "Decedent who postponed reporting interest" )

Decedent who postponed reporting interest. If the transferred bonds were owned by a decedent who had used the cash method and had not chosen to report the interest each year, and who had bought the bonds entirely with his or her own funds, all interest earned before death must be reported in one of the following ways.

1. The surviving spouse or personal representative (executor, administrator, etc.) who files the final income tax return of the decedent can choose to include on that return all interest earned on the bonds before the decedent's death. The person who acquires the bonds then includes in income only interest earned after the date of death.

2. If the choice in (1) is not made, the interest earned up to the date of death is income in respect of the decedent and should not be included in the decedent's final return. All interest earned both before and after the decedent's death (except any part reported by the estate on its income tax return) is income to the person who acquires the bonds. If that person uses the cash method and does not choose to report the interest each year, he or she can postpone reporting it until the year the bonds are cashed or disposed of or the year they mature, whichever is earlier. In the year that person reports the interest, he or she can claim a deduction for any federal estate tax paid on the part of the interest included in the decedent's estate.
Examples follow.

Also make sure to read the section on "U.S. Savings Bond Interest Previously Reported" and the following examples (p. 17). If the decision is made to report the accrued interest on the final tax return (but keep the bonds until maturity), it is important to put documentation and instructions someplace where whoever does the tax returns in the year that the bonds are actually redeemed will be sure to find it.

The 1099-INT that is received when the bonds are redeemed will show ALL the interest, even though some has already been reported. The tax preparer has to know to make the adjustment for the already-reported interest on the tax return. (This isn't difficult. It is remembering that it needs to be done, perhaps after years and through the course of a couple of previous elderly owner's deaths or dementias, that may be difficult.) Otherwise, the interest will end up taxed twice.
Example 2.

Your uncle died and left you a $1,000 Series EE bond. You redeem the bond when it reaches maturity.

Your uncle paid $500 for the bond, so $500 of the amount you receive upon redemption is interest income. Your uncle's executor included in your uncle's final return $200 of the interest that had accrued at the time of your uncle's death. You have to include only $300 in your income.

The bank where you redeem the bond gives you a Form 1099-INT showing interest income of $500. You also receive a Form 1099-INT showing taxable interest income of $300 from your savings account.

You file Form 1040 and complete Schedule B (Form 1040). On line 1 of Schedule B (Form 1040), you list the $500 and $300 interest amounts shown on your Forms 1099. Several lines above line 2, you put a subtotal of $800. Below this subtotal, enter "U.S. Savings Bond Interest Previously Reported" and enter the $200 interest included in your uncle's final return. Subtract the $200 from the subtotal and enter $600 on line 2. You then complete the rest of the form.

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Re: I Bonds - How Your Spouse can Quickly Cash in I Bonds

Post by nisiprius » Sun Sep 01, 2019 3:31 pm

patrickscott wrote:
Sun Sep 01, 2019 11:01 am
...Thanks for your reply. Once we finish processing the I Bonds, my wife, on her own, is going to cash in one small I Bonds. I will post how long it takes to receive payment in the bank...
If you have them at Treasury Direct, in electronic form, you can cash in any desired amount. I don't remember if there's any lower limit at all, but you don't need to cash in a whole bond or anything like that.

Whenever the site has said that a bond has been redeemed, the money has appeared in my bank, and listed as "available funds," on the next business day. Don't count on that just on my say-so, but it's pretty fast.
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Re: I Bonds - How Your Spouse can Quickly Cash in I Bonds

Post by HueyLD » Sun Sep 01, 2019 4:07 pm

"What is the minimum amount allowable for a redemption?

Only an account owner, or a grantee with Transact rights, can redeem an EE or I Bond. If you are partially redeeming an EE or I Bond, you must redeem at least $25, and may not leave less than $25 of redemption value as the remainder of the held securities."

https://www.treasurydirect.gov/indiv/he ... Securities

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Re: I Bonds - How Your Spouse can Quickly Cash in I Bonds

Post by clcarter » Sun Sep 01, 2019 4:15 pm

If bonds are held at Treasury Direct with each spouse POD the other, are taxes due when one dies? Can the surviving spouse immediately control the inherited bonds?

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Re: I Bonds - How Your Spouse can Quickly Cash in I Bonds

Post by jcar » Sun Sep 01, 2019 4:34 pm

My wife went to cash in paper U.S. savings bonds recently and was told by bank they don't do this any longer. This was at Wells Fargo. I thought banks were required to cash these. Any one know for certain. Thanks.

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Re: I Bonds - How Your Spouse can Quickly Cash in I Bonds

Post by Mel Lindauer » Sun Sep 01, 2019 7:42 pm

A perfect example of why you want to hold on to your paper I Bonds.

If you have paper I Bonds with your wife as a co-owner, she can hold them or redeem them whenever she wants. No hoops to jump through as required at TD.

I've held onto mine and when folks ask me, I suggest they do the same and avoid TD altogether.
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Re: I Bonds - How Your Spouse can Quickly Cash in I Bonds

Post by nisiprius » Sun Sep 01, 2019 7:50 pm

jcar wrote:
Sun Sep 01, 2019 4:34 pm
My wife went to cash in paper U.S. savings bonds recently and was told by bank they don't do this any longer. This was at Wells Fargo. I thought banks were required to cash these. Any one know for certain. Thanks.
No, they're not required to. I don't think they ever were, but it used to be nearly universal. Nowadays, where I live, only a few of them do. In fact I am noodging my wife to open an account at a nearby local bank that does--they will redeem them in any amount if you have an account, but only up to $1,000 if you do not.

It is a good question to ask before opening an account at a bank.

The ones that don't may try to give you the idea that "banks don't do that any more," but it's not true.
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Re: I Bonds - How Your Spouse can Quickly Cash in I Bonds

Post by Mel Lindauer » Sun Sep 01, 2019 8:12 pm

nisiprius wrote:
Sun Sep 01, 2019 7:50 pm
jcar wrote:
Sun Sep 01, 2019 4:34 pm
My wife went to cash in paper U.S. savings bonds recently and was told by bank they don't do this any longer. This was at Wells Fargo. I thought banks were required to cash these. Any one know for certain. Thanks.
No, they're not required to. I don't think they ever were, but it used to be nearly universal. Nowadays, where I live, only a few of them do. In fact I am noodging my wife to open an account at a nearby local bank that does--they will redeem them in any amount if you have an account, but only up to $1,000 if you do not.

It is a good question to ask before opening an account at a bank.

The ones that don't may try to give you the idea that "banks don't do that any more," but it's not true.
That's true. There are multiple local banks in my area that still redeem them with no problems.

I'm sure that's true in most areas.
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Re: I Bonds - How Your Spouse can Quickly Cash in I Bonds

Post by HueyLD » Sun Sep 01, 2019 8:38 pm

Mel,

It is unfortunate, but banks in my area no longer want to redeem paper bonds. They make it difficult by either limiting the amount per day to a low amount (such as $1,000), refusing to do so for non-customers, or outright not doing it. The major CU in town fortunately still performs redemptions for up to $250,000, but it is for customers only.

I think it may be impossible to find any bank that will redeem paper bonds down the road. It is so sad that people may be forced to convert their old paper to electronic bonds and having to put up with all that crap with TD. TD is o.k. until something non-routine happens. Gosh, even those working for estate/trust attorney's office are of no help in handling TD issues.

Of course one can always send the paper bonds to the retail division of the Treasury for redemption, but such action requires signature guarantee that many banks no longer perform except for private banking customers.

Somehow, I think that the Treasury is trying to kill the savings bond program for small and middle class savers.

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Re: I Bonds - How Your Spouse can Quickly Cash in I Bonds

Post by johan851 » Mon Sep 02, 2019 4:00 pm

I logged in today to set this up, but I can't for the life of me find the radio button that allows switching from view rights to transact rights. I can only grant view rights. I can't edit those view rights into transact rights either.

Anyone else having the same issue?

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Re: I Bonds - How Your Spouse can Quickly Cash in I Bonds

Post by nisiprius » Mon Sep 02, 2019 4:38 pm

johan851 wrote:
Mon Sep 02, 2019 4:00 pm
I logged in today to set this up, but I can't for the life of me find the radio button that allows switching from view rights to transact rights. I can only grant view rights. I can't edit those view rights into transact rights either.

Anyone else having the same issue?
Is the other person registered as a secondary owner?

You can only assign "transact" rights to person X if X is registered as a secondary owner; that is, the screen shows "Registration: Myself WITH X."

The less-than-clear language is:

How do I grant View and Transact Rights to securities held in my TreasuryDirect account?
...You may grant View rights only to a security held in your name to any individual TreasuryDirect account holder. View/Transact rights may be granted to the second-named registrant of a security with Primary Owner registration. View rights may only be granted to the Beneficiary of a security with that registration. Transact rights allow the second-named registrant, or grantee, to transfer a security, as well as change the maturity and/or interest payment destination. Note: View/Transact rights are not available in entity accounts.
In my account, when I ask to "edit" the existing rights on one of my bonds, that is registered as "Myself WITH MySpouse," it says:

"Based on the type of registration above, you may grant either View or Transact rights.
( ) View rights only
(•) Transact rights"

In other words, I think that it is saying I can grant Transact right because MySpouse is registered as a secondary owner.
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Re: I Bonds - How Your Spouse can Quickly Cash in I Bonds

Post by johan851 » Mon Sep 02, 2019 4:51 pm

nisiprius wrote:
Mon Sep 02, 2019 4:38 pm
Is the other person registered as a secondary owner?

You can only assign "transact" rights to person X if X is registered as a secondary owner; that is, the screen shows "Registration: Myself WITH X."

The less-than-clear language is:

How do I grant View and Transact Rights to securities held in my TreasuryDirect account?
...You may grant View rights only to a security held in your name to any individual TreasuryDirect account holder. View/Transact rights may be granted to the second-named registrant of a security with Primary Owner registration. View rights may only be granted to the Beneficiary of a security with that registration. Transact rights allow the second-named registrant, or grantee, to transfer a security, as well as change the maturity and/or interest payment destination. Note: View/Transact rights are not available in entity accounts.
In my account, when I ask to "edit" the existing rights on one of my bonds, that is registered as "Myself WITH MySpouse," it says:

"Based on the type of registration above, you may grant either View or Transact rights.
( ) View rights only
(•) Transact rights"

In other words, I think that it is saying I can grant Transact right because MySpouse is registered as a secondary owner.
Thanks, that was it. :)

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Re: I Bonds - How Your Spouse can Quickly Cash in I Bonds

Post by feh » Tue Sep 03, 2019 11:02 am

Didn't read every post...is there some reason the spouse can't just use the account holder's login credentials?

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Re: I Bonds - How Your Spouse can Quickly Cash in I Bonds

Post by johan851 » Tue Sep 03, 2019 11:31 am

feh wrote:
Tue Sep 03, 2019 11:02 am
Didn't read every post...is there some reason the spouse can't just use the account holder's login credentials?
You should read every post! :)
nisiprius wrote:
Sat Aug 31, 2019 2:14 pm
...

Now, as a practical matter, I think it is likely that a widow would find that if they logged in within a short time of their spouse's death, they they actually could redeem the bond, and it would actually get paid into the joint checking account.

But I'm not at all sure that this is strictly legal.

When I contacted Treasury Direct to ask about this specific situation, they said that the surviving spouse is supposed to contact Treasury Direct, provide them with a mailed, signed, paper form and a death certificate and so on, and that they would then transfer the bonds into her account. That is, she would need to go through the usual formalities.
In short, my understanding is that it may not be legal for a spouse to log into the account and transact on those securities because (a) the account isn't theirs and (b) the securities aren't theirs.

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Re: I Bonds - How Your Spouse can Quickly Cash in I Bonds

Post by Mel Lindauer » Tue Sep 03, 2019 5:20 pm

HueyLD wrote:
Sun Sep 01, 2019 8:38 pm
Mel,

It is unfortunate, but banks in my area no longer want to redeem paper bonds. They make it difficult by either limiting the amount per day to a low amount (such as $1,000), refusing to do so for non-customers, or outright not doing it. The major CU in town fortunately still performs redemptions for up to $250,000, but it is for customers only.

I think it may be impossible to find any bank that will redeem paper bonds down the road. It is so sad that people may be forced to convert their old paper to electronic bonds and having to put up with all that crap with TD. TD is o.k. until something non-routine happens. Gosh, even those working for estate/trust attorney's office are of no help in handling TD issues.

Of course one can always send the paper bonds to the retail division of the Treasury for redemption, but such action requires signature guarantee that many banks no longer perform except for private banking customers.

Somehow, I think that the Treasury is trying to kill the savings bond program for small and middle class savers.
Here's a Forbes column I did back in 2011, speculating that Treasury was intentionally attempting to kill off the savings bond program.

https://www.forbes.com/sites/theboglehe ... ngs-bonds/
Best Regards - Mel | | Semper Fi

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Re: I Bonds - How Your Spouse can Quickly Cash in I Bonds

Post by Seasonal » Tue Sep 03, 2019 5:40 pm

johan851 wrote:
Tue Sep 03, 2019 11:31 am
feh wrote:
Tue Sep 03, 2019 11:02 am
Didn't read every post...is there some reason the spouse can't just use the account holder's login credentials?
You should read every post! :)
nisiprius wrote:
Sat Aug 31, 2019 2:14 pm
...

Now, as a practical matter, I think it is likely that a widow would find that if they logged in within a short time of their spouse's death, they they actually could redeem the bond, and it would actually get paid into the joint checking account.

But I'm not at all sure that this is strictly legal.

When I contacted Treasury Direct to ask about this specific situation, they said that the surviving spouse is supposed to contact Treasury Direct, provide them with a mailed, signed, paper form and a death certificate and so on, and that they would then transfer the bonds into her account. That is, she would need to go through the usual formalities.
In short, my understanding is that it may not be legal for a spouse to log into the account and transact on those securities because (a) the account isn't theirs and (b) the securities aren't theirs.
Can someone link to a specific law that would be violated?

What's the penalty for this alleged violation of the law?

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Re: I Bonds - How Your Spouse can Quickly Cash in I Bonds

Post by nisiprius » Tue Sep 03, 2019 9:30 pm

Seasonal wrote:
Tue Sep 03, 2019 5:40 pm
...Can someone link to a specific law that would be violated?

What's the penalty for this alleged violation of the law?...
It would be estate law, which is state law and thus is different in every state. I'm not a lawyer and all I know about it comes from involvement e.g. in my late parents' estates. It's a legal specialty, anyway.

But to the extent that I, as a layperson, understand it, the law is that after someone dies, their assets belong to their estate, and the only person legally allowed to touch them is the "administrator" of the estate, who is appointed by the probate court and is often the "executor" named in the will.

There are a boatload of exceptions to make it easier for spouses and the like, "Totten trusts," rules about houses being "community property," rules allowing a spouse to get into a joint bank account, pay-on-death accounts, "beneficiaries," etc.

The point is that even if person X is allowed to touch deceased person Y's estate--because spouses are special, or the account is pay-on-death, or they are a beneficiary--the legal way they do it is by submitting forms that say "X is allowed to, and I am X." With an attached copy of the death certificate and so forth. Not by pretending that person Y is still alive and that they are Y.

The penalty is that a ticked-off person, who thinks they're entitled to more of Y's estate than they are getting, would bring suit. If part of the complaint was that some of the stuff they're entitled to is gone, because some bank let person Y come in and take it without proper authorization, then things could get ugly. The penalty would be whatever a court decided the penalty should be.

In the case of a paper bond, the situation seems to be easy because of the way co-owned bonds work. If a bond is co-owned by "Y and X," then the rules say simply that either co-owner is allowed to redeem the bond... even without the other's knowledge or consent. So all that person has to do is say "I am X and I am a co-owner, therefore I can cash the bond." They don't need to pretend they are Y, and they don't need to say whether Y is dead or alive, for example.

In the case of a electronic bond, the situation is not the same.
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Re: I Bonds - How Your Spouse can Quickly Cash in I Bonds

Post by Seasonal » Wed Sep 04, 2019 5:08 am

nisiprius wrote:
Tue Sep 03, 2019 9:30 pm
Seasonal wrote:
Tue Sep 03, 2019 5:40 pm
...Can someone link to a specific law that would be violated?

What's the penalty for this alleged violation of the law?...
It would be estate law, which is state law and thus is different in every state. I'm not a lawyer and all I know about it comes from involvement e.g. in my late parents' estates. It's a legal specialty, anyway.

But to the extent that I, as a layperson, understand it, the law is that after someone dies, their assets belong to their estate, and the only person legally allowed to touch them is the "administrator" of the estate, who is appointed by the probate court and is often the "executor" named in the will.

There are a boatload of exceptions to make it easier for spouses and the like, "Totten trusts," rules about houses being "community property," rules allowing a spouse to get into a joint bank account, pay-on-death accounts, "beneficiaries," etc.

The point is that even if person X is allowed to touch deceased person Y's estate--because spouses are special, or the account is pay-on-death, or they are a beneficiary--the legal way they do it is by submitting forms that say "X is allowed to, and I am X." With an attached copy of the death certificate and so forth. Not by pretending that person Y is still alive and that they are Y.

The penalty is that a ticked-off person, who thinks they're entitled to more of Y's estate than they are getting, would bring suit. If part of the complaint was that some of the stuff they're entitled to is gone, because some bank let person Y come in and take it without proper authorization, then things could get ugly. The penalty would be whatever a court decided the penalty should be.

In the case of a paper bond, the situation seems to be easy because of the way co-owned bonds work. If a bond is co-owned by "Y and X," then the rules say simply that either co-owner is allowed to redeem the bond... even without the other's knowledge or consent. So all that person has to do is say "I am X and I am a co-owner, therefore I can cash the bond." They don't need to pretend they are Y, and they don't need to say whether Y is dead or alive, for example.

In the case of a electronic bond, the situation is not the same.
That would make sense if there was someone who would receive less as a result of the spouse's actions.

However, the situation was the spouse could have gotten the money by following a specified procedure. You had written: "When I contacted Treasury Direct to ask about this specific situation, they said that the surviving spouse is supposed to contact Treasury Direct, provide them with a mailed, signed, paper form and a death certificate and so on, and that they would then transfer the bonds into her account. That is, she would need to go through the usual formalities."

In that case, I don't see how someone could claim they would be entitled to more absent the improper action by the spouse. It would also not apply if the spouse were the soul heir or would otherwise get those funds when the estate was probated (which I'd bet is the most common case).

As the old saying goes "no harm, no foul".

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Re: I Bonds - How Your Spouse can Quickly Cash in I Bonds

Post by patrickscott » Wed Sep 04, 2019 12:30 pm

Or she and your executor can accrue the interest on her and your joint return for the year of your death.

Or your executor might accrue the interest on the estate’s income tax return and offset the income with estate administration expenses.


-----------

Thanks for your reply. Unfortunately, I don't understand your answer.

Is there an easy way that she, my widow (there will be no executor or estate), can quickly have Treasury Direct calculate the accrued interest in the year of death?

Is there a way to keep the I Bonds and just pay off the accrued interest in the year of death? The only options I see is to pay the taxes yearly or at time of I Bond surrender.

Thanks again!
Gill wrote:
Sun Sep 01, 2019 11:26 am
It's really quite simple. In the preparation of the joint tax return for the year of death you report all the accrued interest on the bonds. That is the difference between their value at year end and the original cost. No need to cash in the bonds or do anything else. All you need to determine is their redemption value which can be easily done from the Website treasurydirect.gov. Your wife would keep the bonds and then report the accrued interest each year in the same manner.

Gill
So one can report accrued interest without having a 1099?

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Re: I Bonds - How Your Spouse can Quickly Cash in I Bonds

Post by chemocean » Wed Sep 04, 2019 1:34 pm

First of all, thanks for this post. It reminder me that I needed to add transaction rights to my co-owner who just recently opened their own Treasury Direct Account.

I have not read all the post. This is my understanding of the process of redeeming I-bonds from a deceased bondholder. This knowledge is from assisting my parents, my siblings, co-owner with Treasury Direct with multiple bonds with multiple registrations. What happens before or after the death of bondholder is dependent on the registration of the bond either in paper or electronic in Treasury Direct.

There are three types of registration: sole owner, owner with one co-owner and owner with one beneficiary. Note that a owner can have only one co-owner or one beneficiary, but NOT both a co-owner or beneficiary.

Sole Owner: The assets need to go through probate. PERIOD. Luckily, I was well informed of this fact and took actions to prevent my parent's bonds going through Probate. As B. Steiner has indicated some states charge a fee on all assets going through probate (i.e., 1.75% in DE). Also, note that the only way to change the registration is in an electronic Treasury Direct account. If you have paper bonds in your sole name, they will be going through probate unless you take action. To change the registration of a paper bond, you need to 1) convert it to an electronic bond, and then 2) change the registration within Treasury Direct.

To convert a paper bond to an electronic bond, 1) the owner needs to create a Treasury Direct account, 2) within the owners Treasury Direct create a Manifest for each bond which includes the registration of the bonds and the bond numbers, 3) I think the signature on the manifest requires some kind of validation (Medallion), but I can't remember which one, 4) send the Manifest and bonds to the office on the Manifest. I would suggest sending this by certified mail. My parents send their bonds and Manifest at the time when the office was moving and followed the tracking as the envelope followed office from West Virginia to Minnesota.

The bonds will appear in a converted bond account attached to your primary account that has a different account number. THEN AND ONLY THEN, can you add a beneficiary or co-owner to the bond by changing the registration of the electronic bond.

Owner with a Co-Owner.
A co-owner is an owner of the bond, and thus the bond should NOT go through Probate.
Paper Bonds:
If the co-owner wants to transfer the bond of the deceased to them as sole owner without redeeming the bond and without assuming the tax for the accrued interest, the easiest way is to convert the bonds to electronic bonds and the co-owner to set up a Treasury Direct Account NOW. There is a way using paper forms (5511) for the co-owner on a paper bond to transfer the bond into their own name, but that requires sending in the bond and setting up a Treasury Direct account, so why not go through the process now with less stress.

The co-owner can also redeem the paper bonds and be taxed for the accrued interest using form 5512. This form requires a Medallion signature.

In summary, paper bonds with co-owner might as well convert their bonds to electronic NOW, especially if the co-owner wants to transfer the bond in their sole name with the possibility of adding a new co-owner or beneficiary.

Electronic bonds:
The owner can give the co-owner of electronic bonds registered in Treasury Direct three levels of rights: none, view rights and transact Rights.
View and transact rights require the co-owner to have a Treasury Direct account. With transact rights, I believe the co-owner can redeem the owners I-bond from THEIR OWN Treasury Direct account. Below are the instructions for the owner to change the rights of the co-owner:
You may grant View rights only to a security held in your name to any individual TreasuryDirect account holder.
View/Transact rights may be granted to the second-named registrant of a security with Primary Owner registration. View rights may only be granted to the Beneficiary of a security with that registration. Transact rights allow the second-named registrant, or grantee, to transfer a security, aswell as change the maturity and/or interest payment destination. Note: View/Transact rights are not available in entity accounts.
Click the Manage Direct tab at the top of the page.
Select Assign View or Transact rights from the Manage My Securities box.
On the Assign Rights page, choose the type of security you wish to assign rights for, and click "Select".
On the Assign Rights Summary page, choose the security you wish to assign rights to, and click "Select".
On the Assign Rights Detail page, click the "Add" button at the bottom of the page.
On the Add Rights page, Enter the grantee's account number in the Grantee's TreasuryDirect Account # field.
Choose rights you wish to grant (The page will default to View rights only. If you wish to grant Transact rights, choose the appropriate radio button).
Click "Submit".

The Assign Rights Summary page will be displayed with a message describing the type of rights granted and the name of the grantee. The message will also advise an e-mail has been sent to the grantee explaining the rights you granted.

Note: View and Transact Rights may also be edited or deleted by clicking the "Edit" or "Delete" button at the bottom of the Assign Rights Detail page.

Technically, since the co-owner is now the sole owner of the owner's bond after his/her death, they can redeem the I-bonds from the owners account using the transact rights with their own account. But upon the death of the co-owner the I-bonds will be going through Probate with additional documentation required for the death of the owner.

At the death of owner, the co-owner might transfer the I-bonds into their own account, so that co-owner (now sole owner) can add a new co-owner or beneficiary so the Ibonds don't through Probate upon their death. The Executor or co-owner sends the Certified copy of the death certificate to the Office of Fiscal Services. Then within the co-owners account, they can send a secured email saying "I am the co-owner of bonds in the account of deceased owner (account number), for which a Certified death certificate is on file, please transfer these bonds to my account as sole owner? and Viola, several days later the I-bonds appear in the co-owners account, at which time they can change the registration.

Owner with Beneficiary:
Note that if Ibonds are redeemed to pay for qualified education expenses of the owner or spouse or dependents on their tax return, the accrued interest is not taxable. Since the maturity of bonds is 30-years, it is probable that beneficiary who are adult children now, will be able to use the bonds tax free to educational expenses of their own children.
Paper bonds
Convert now, otherwise the beneficiaries will need to turn in paper with Medallion signatures, whether they redeem or convert to their own Treasury Direct Account.

Electronic Bonds:
Similar to co-owner. The Executor or co-owner sends the Certified copy of the death certificate to the Office of Fiscal Services. Beneficiary sets up their own Treasury Direct Account. Then Beneficiary sends secured email within their own Treasury Direct Account saying "I am the beneficiary of bonds in the account of deceased owner (account number), for which a Certified death certificate is on file, please transfer these bonds to my account as sole owner? Then change the registration to add co-owner or beneficiary.

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Re: I Bonds - How Your Spouse can Quickly Cash in I Bonds

Post by Steelersfan » Wed Sep 04, 2019 2:51 pm

patrickscott wrote:
Wed Sep 04, 2019 12:30 pm

So one can report accrued interest without having a 1099?
I did, last year. I transferred some I-Bonds to my kids and reported accrued interest on my tax return that was on the transaction records from Treasury Direct. I did not get a 1099 from them. I printed out a copy of those transactions, saved a copy in my records, and told my kids to save one too since Treasury Direct will issue a 1099 for the full amount of interest when they finally sell the bonds.

I hope they remember 10 or 15 years down the road.

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Re: I Bonds - How Your Spouse can Quickly Cash in I Bonds

Post by Gill » Wed Sep 04, 2019 5:57 pm

patrickscott wrote:
Wed Sep 04, 2019 12:30 pm

So one can report accrued interest without having a 1099?
Absolutely. There is no 1099. You simply calculate the accrued interest and report it and then do the same each year for the life of the bonds.
Gill
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Re: I Bonds - How Your Spouse can Quickly Cash in I Bonds

Post by patrickscott » Sun Sep 08, 2019 10:14 am

Steelersfan wrote:
Wed Sep 04, 2019 2:51 pm
patrickscott wrote:
Wed Sep 04, 2019 12:30 pm

So one can report accrued interest without having a 1099?
I did, last year. I transferred some I-Bonds to my kids and reported accrued interest on my tax return that was on the transaction records from Treasury Direct. I did not get a 1099 from them. I printed out a copy of those transactions, saved a copy in my records, and told my kids to save one too since Treasury Direct will issue a 1099 for the full amount of interest when they finally sell the bonds.

I hope they remember 10 or 15 years down the road.
_____________

Great! Thanks for the information! I am a little confused though. Isn't transferring I-Bonds the same as selling them? I thought transferring I-Bonds would result in Treasury Direct issuing an online 1099, downloadable for your tax return. It is my understanding that they do not mail it to you.

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Re: I Bonds - How Your Spouse can Quickly Cash in I Bonds

Post by patrickscott » Sun Sep 08, 2019 10:30 am

Gill wrote:
Wed Sep 04, 2019 5:57 pm
patrickscott wrote:
Wed Sep 04, 2019 12:30 pm

So one can report accrued interest without having a 1099?
Absolutely. There is no 1099. You simply calculate the accrued interest and report it and then do the same each year for the life of the bonds.
Gill
Thanks Gill for the information. I just wish there were a way of paying, now, just a small portion, e.g., 10%, of the accrued interest.

Thanks again!

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Re: I Bonds - How Your Spouse can Quickly Cash in I Bonds

Post by goodenyou » Sun Sep 08, 2019 11:20 am

My wife and I are registered without second-named registrant on our separate I-Bond accounts. When I change this for each bond, do I choose "Sole Owner" and fill-out the "First Name Registrant" and "Second Named Registrant" information for each of us on my bonds and her bonds?

or do I choose "Primary Owner" and fill out the same way? or do I choose "Beneficiary" and fill out the same way?

I just want us to access the I Bonds registered in our name and the other's name in the case of each of our demise without it being held up in bureaucracy.

Thanks for the heads up on this
"Ignorance more frequently begets confidence than does knowledge" | Do you know how to make a rain dance work? Dance until it rains.

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Re: I Bonds - How Your Spouse can Quickly Cash in I Bonds

Post by goodenyou » Sun Sep 08, 2019 11:32 am

...I think I got it. Thanks anyway. Glad I changed it though!
"Ignorance more frequently begets confidence than does knowledge" | Do you know how to make a rain dance work? Dance until it rains.

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Re: I Bonds - How Your Spouse can Quickly Cash in I Bonds

Post by Naikansha » Sun Sep 08, 2019 3:44 pm

We have some paper I bonds that won't mature for another 20 years, one is spouses co-owned, the others individually owned with POD. We would like to redeem some of them sometime within the next 10 years or so to help grandchildren with college expenses. If we are able to redeem them at a bank, can we transfer the proceeds to their 529 accounts without having to pay taxes due? Or must they be made electronic bonds and only then sold using TD? Thanks for any help.
Last edited by Naikansha on Sun Sep 08, 2019 5:44 pm, edited 1 time in total.

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Re: I Bonds - How Your Spouse can Quickly Cash in I Bonds

Post by Steelersfan » Sun Sep 08, 2019 4:46 pm

patrickscott wrote:
Sun Sep 08, 2019 10:14 am
_____________

Great! Thanks for the information! I am a little confused though. Isn't transferring I-Bonds the same as selling them? I thought transferring I-Bonds would result in Treasury Direct issuing an online 1099, downloadable for your tax return. It is my understanding that they do not mail it to you.
That's correct.

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Re: I Bonds - How Your Spouse can Quickly Cash in I Bonds

Post by chemocean » Sun Sep 08, 2019 7:30 pm

goodenyou wrote:
Sun Sep 08, 2019 11:20 am
My wife and I are registered without second-named registrant on our separate I-Bond accounts. When I change this for each bond, do I choose "Sole Owner" and fill-out the "First Name Registrant" and "Second Named Registrant" information for each of us on my bonds and her bonds?

or do I choose "Primary Owner" and fill out the same way? or do I choose "Beneficiary" and fill out the same way?

I just want us to access the I Bonds registered in our name and the other's name in the case of each of our demise without it being held up in bureaucracy.

Thanks for the heads up on this
A secondary owner can have both view and transact rights on a IBond held in the primary owner's Treasury Direct account. A beneficiary can have only view rights. From the description of your desires above, it looks like you want to assign your wife and vice versa as secondary owner. Then assign the secondary owner transact rights for each bond in both accounts. Upon the death of one of you, you still have to mail in the Certificate of Death. There may be way to send a scanned copy as a email attachment in your secured mail in Treasury Direct account. Once the Certificate is on file, transferring the bonds to the surviving spouse is as easy as sending a secured email in their Treasury Direct account. This transfer of owner is a not taxable event, with the accrued interest transferred to the surviving spouse.

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