TreasuryDirect POD transfer

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Topic Author
lstone19
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Joined: Fri Nov 03, 2017 3:33 pm

TreasuryDirect POD transfer

Post by lstone19 »

Does anyone have any recent experience with TreasuryDirect and getting savings bonds with a POD (payable on death) beneficiary transferred to the beneficiary's TreasuryDirect account?

My MIL passed away in late November owning a good number of savings bonds at TreasuryDirect so that at least one will be reaching its final 30-year maturity each month through 12/2022. My wife is the POD beneficiary. That bonds are maturing after death and before TD transfers them to her account seems to be a complication. The instructions she was given by a TreasuryDirect representative were to send a certified death certificate, form 5511 to transfer the bonds from her mother's account to hers, and form 5512 to transfer the funds from the bonds that matured since death (one on 12/1/20, another will on 1/1/21) to my wife's bank account (when savings bonds reach final maturity, the proceeds are placed in what TD calls a "zero percent certificate of indebtedness" - in other words, a non-interest-bearing holding instrument).

Does anyone have experience with this and do these instructions match what you were told? And if so, how long did it take TD to process things (I've read various times from one week (it's been two since mailing) to several months when things went wrong). I don't have a lot of confidence that this is the correct procedure (TD is rather opaque on the process simply saying to call for instructions rather than publishing them). While the forms are for transferring securities and cash respectively, using them for death transfers seems to be pushing what they're designed for since they're supposed to be signed by the now deceased original owner. I'm really surprised that TD does not have a standard form for transfers due to death.

I realize between Covid and the current mail delays, things are likely to be slower. OTOH, an insurance company where my MIL held an annuity on which my wife was a beneficiary was processed by them four days after mailing the claim to them (for all we bash annuities as an investment (this was not an SPIA), they do process things quickly).
chemocean
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Joined: Mon Dec 19, 2016 9:45 pm

Re: TreasuryDirect POD transfer

Post by chemocean »

Please confirm that you send the following:
1) Certified copy of the death certificate of bond owner,
2) Form 5512 with Medallion guaranteed signature with the original paper bonds with your wife listed as POD to redeem the maturing bonds into the desired banking account, and
3) Form 5511 with Medallion guaranteed signature with the original paper bonds with your wife listed as POD of the non-maturing bonds to transfer the bonds to your wife's existing Treasury Direct Account.

To:
Treasury Retail Securities Services
PO Box 7015
Minneapolis, MN 55480-7015

Once they show up in your wife's TD account, I suggest she go into her account and change the registration to add a co-owner or POD. Otherwise, the bonds will be part of your wife's estate. Also, unless you have evidence that

I had problems with action on forms at the time when this office was being moved from Parkersburg WVA to Minneapolis, MN.

If the bonds were held electronically in your MIL's TD account, I followed a much easier way to proceed that takes less than a week and does not required Medallion guaranteed signature once the death certificate is on file with the office above.
Topic Author
lstone19
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Re: TreasuryDirect POD transfer

Post by lstone19 »

chemocean wrote: Mon Dec 28, 2020 12:12 am Please confirm that you send the following:
1) Certified copy of the death certificate of bond owner,
2) Form 5512 with Medallion guaranteed signature with the original paper bonds with your wife listed as POD to redeem the maturing bonds into the desired banking account, and
3) Form 5511 with Medallion guaranteed signature with the original paper bonds with your wife listed as POD of the non-maturing bonds to transfer the bonds to your wife's existing Treasury Direct Account.

To:
Treasury Retail Securities Services
PO Box 7015
Minneapolis, MN 55480-7015

Once they show up in your wife's TD account, I suggest she go into her account and change the registration to add a co-owner or POD. Otherwise, the bonds will be part of your wife's estate. Also, unless you have evidence that

I had problems with action on forms at the time when this office was being moved from Parkersburg WVA to Minneapolis, MN.

If the bonds were held electronically in your MIL's TD account, I followed a much easier way to proceed that takes less than a week and does not required Medallion guaranteed signature once the death certificate is on file with the office above.
Bonds are already in electronic form at TD in MIL's account. So what was the easier way you mention?

As to your earlier points, yes, certified death certificate, 5511 and 5512 with medallion guarantee, all sent to that Minneapolis address.

Already in the plan to add me as POD once done.
chemocean
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Re: TreasuryDirect POD transfer

Post by chemocean »

Since the bonds are already electronically in your MILs account, I and my siblings were given instruction to write the following secure message from beneficiary's Treasury Direct Account concerning numerous bonds held by my father.

"I am a beneficiary of bonds owned by the deceased bond holder <name> and <SSN if you have it> and <held in TD account XXX>. A death certificate for the bonds holder is on file with your office. Please transfer all bonds for which I am a beneficiary into my Treasury Direct Account>.

Once the Personal Representative had sent a copy of the certified death certificate to the MN office, each of six siblings sent similar message from their TD on-line accounts, and all bonds were transferred with no problems with a week, a few within days.

I don't know if the cash in the "zero percent certificate of indebtedness" account would also be transferred and then your wife would need to transfer the cash to her savings or checking external to the TD account.

As the Personal Representative, I also sent my appointment letter along with the death certificate and I was able to confirm that my father's TD account was empty after I had heard from all beneficiaries that they had transferred their bonds.
Topic Author
lstone19
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Re: TreasuryDirect POD transfer

Post by lstone19 »

Thanks. Following up with a secure message if nothing happens this week was already going to be the next step so at that point, we'd basically be in the same place as what worked for you.

Although my wife is also one of several siblings (seven in her case), originally MIL had the bonds titled in just her name with no co-owner or beneficiary. After reading about some of the hassles of having TD assets go through an estate, DW convinced her to change them to make them all POD to DW (who would also be executor and successor trustee) with an agreement that she would pass on appropriate shares of the eventual cash to the siblings. So no other siblings are involved until she writes them checks.

As for the cash in the "certificate of indebtedness" (CofI), our view is that should be my wife's and transferred to her. MIL died on 11/30. Even though TD didn't receive the death certificate and other forms until December (but were notified of the death later on 11/30 as how they'd handle it was already a concern), the POD transfer should have taken effect at the moment of death so when the savings bond matured on 12/1, it was already legally my wife's. So I was surprised when TD said to send 5512 to transfer that cash directly from MIL's TD account to DW's checking account as our expectation was they would say once they had the paperwork, they would go back and process the transfer as of 11/30 with the result of redoing the maturity to place that cash in a CofI in DW's account instead.
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Steelersfan
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Re: TreasuryDirect POD transfer

Post by Steelersfan »

Won't the TOD designation override the will, and when the wife distributes the cash to the siblings, won't those will be considered gifts?

Depending on the amount distributed, she may then have to file gift tax forms for each of them.
Topic Author
lstone19
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Re: TreasuryDirect POD transfer

Post by lstone19 »

Steelersfan wrote: Mon Dec 28, 2020 8:43 am Won't the TOD designation override the will, and when the wife distributes the cash to the siblings, won't those will be considered gifts?
Yes and yes. I mentioned that my wife is executor and trustee only to say she's the one dealing with all the financial stuff.
Depending on the amount distributed, she may then have to file gift tax forms for each of them.
The amount is not even close to having gift tax be a concern. The decision to go this route was based in large part on the "gifts" being sufficiently small.
chemocean
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Re: TreasuryDirect POD transfer

Post by chemocean »

It is likely, the tax on interest earned during your MILs lifetime was likely accrued rather than paid annually. Thus, you and your wife will need to pay taxes on the accrued interest when the bonds mature or are redeemed. You may want to consider taking your taxes on the current accrued interest that you and your wife will need to pay when making the gifts to the siblings. BSteiner also pointed out in previous posts that the personal representative could pay taxes on accrued interest on some of the bonds if there still has "room" in tax bracket of your MILs final 2020 tax return that are lower than your projected marginal tax bracket when the bonds will be redeemed or mature. If you do this, I would suggest you list the interest by the name of each bond in your MILs TD account on Schedule B if you have access to those records. and keep track of these payments so you don't tax yourself twice for accrued interest when the bonds mature or are redeemed.

Also, you might want to look at the tax implications if your wife gifts the bonds once the arrive in her TD account to her siblings in their TD accounts. I don't know how the tax burden of accrued interest between your wife and her siblings is calculated.
Topic Author
lstone19
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Re: TreasuryDirect POD transfer

Post by lstone19 »

Chemocean, thanks but we were already ahead of you on all that. Interest to date will be declared on MIL's final tax return and taxes on future interest is calculated into the shares the siblings will receive. We've actually had a spreadsheet for this setup months ago giving us the amount each sibling will receive and the interest to be declared by MIL and what will be taxed going forward.

To your last paragraph, the siblings will not be receiving bonds. There is no way that these bonds can be split seven ways fairly (most months have only one bond maturing). They will receive a lump sum cash amount that includes the present value plus an allowance for future interest (4% the bonds will pay rather than what they will earn) less what we will pay in taxes on them. She will then collect the cash from the bonds as they mature each month between now and 12/2022. So yes, that means we're paying out money to the siblings now in exchange for a small amount of cash flow for the next two years.

One of the goals was to make this as simple as possible with TD. Once the bonds are transferred, she just lets them mature for the next two years and transfers the cash each month. After we get the 2022 1099-INT, there will be no reason for us to ever deal with TD and all their hassles again.
chemocean
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Re: TreasuryDirect POD transfer

Post by chemocean »

lstone19 wrote: Mon Dec 28, 2020 1:05 pm Chemocean, thanks but we were already ahead of you on all that. Interest to date will be declared on MIL's final tax return and taxes on future interest is calculated into the shares the siblings will receive. We've actually had a spreadsheet for this setup months ago giving us the amount each sibling will receive and the interest to be declared by MIL and what will be taxed going forward.

To your last paragraph, the siblings will not be receiving bonds. There is no way that these bonds can be split seven ways fairly (most months have only one bond maturing). They will receive a lump sum cash amount that includes the present value plus an allowance for future interest (4% the bonds will pay rather than what they will earn) less what we will pay in taxes on them. She will then collect the cash from the bonds as they mature each month between now and 12/2022. So yes, that means we're paying out money to the siblings now in exchange for a small amount of cash flow for the next two years.

One of the goals was to make this as simple as possible with TD. Once the bonds are transferred, she just lets them mature for the next two years and transfers the cash each month. After we get the 2022 1099-INT, there will be no reason for us to ever deal with TD and all their hassles again.
It looks like you have everything covered. We split the 8 bonds six ways and most still hold their bonds earning above market interest. Luckily, one of the siblings was JTWROS on a banking account that allowed us to equalize the value of bonds. We were lucky that we had parents that taught the siblings to deal with the family inheritance fairly among the siblings and grandchildren. Hopefully your MIL taught your wife and her siblings in a like manner. From this forum, I'm told that not all families are like that.
Topic Author
lstone19
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Re: TreasuryDirect POD transfer

Post by lstone19 »

Followup: TD responded to an email asking for a processing time estimate and was told four to six weeks is normal. Quite a difference from the one week that chemocean experienced. I wonder if that there are bonds that are past their 30-year maturity slows the process down since it probably takes them extra work to process them. My thought is that while the POD designation was part of the bond, it is not (and cannot - we checked pre-death) part of the of the CofI that holds the cash from the matured bonds. So our hope is that TD needs to go back and redo the maturities that happened after death as DW became owner at the moment of death even though TD didn't officially know it at the time the next bond matured.
Topic Author
lstone19
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Re: TreasuryDirect POD transfer

Post by lstone19 »

Further followup: The bonds transferred today. 15 business days (3-1/2 weeks calendar time with the holidays in there) from when they say they received it. An email from them also said the cash from the two bonds that matured since death is being transferred to our checking account as we requested. So it looks like the combination of a good cover letter, original death certificate, and forms 5511 and 5512 was indeed all they needed.
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