EE paper bond conversion and Tax implications

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sometalk
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Joined: Thu Jul 20, 2017 9:38 am

EE paper bond conversion and Tax implications

Post by sometalk »

Bogleheads,

Recently DW was given a few EE paper bonds by family, all of which have matured. All of the bonds have DW as a co-owner, some with a deceased grandparent and others with a living parent. We were thinking of converting all of them to electronic EE bonds and then cashing them in. Had a few questions about the process and the tax implications of cashing them in.

- For the bonds where the DW is a co-owner with the deceased grandparent, we will need a certified death certificate of them, to send in to the treasury with the manifest for converting them to electronic bonds. Anything else we should be aware of? The tax implications of cashing these in should be straight forward, as DW is the only surviving owner so we will end up owing the taxes.
- For the bonds where the DW is a co-owner with the living parent, I believe it is a fairly straight forward conversion. Is there a way to guarantee that the tax liability of cashing these bonds in would be on us and not on the parent?

Considering nether I or DW have previously held bonds (EE or I) on their own, are there any other gotchas we should be aware of?
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Tubes
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Re: EE paper bond conversion and Tax implications

Post by Tubes »

Matured converted bond cash out immediately upon conversion to electronic. You can't let it ride to a new year. Once matured, it is out of your hands if electronic. So if you want to hold off the income until next year, hold off sending the manifest. You could potentially send two manifests if you want to split tax years. I'm guessing the amount is small so this doesn't matter, but it is worth mentioning.

I have converted bonds on my account and they automatically cash out on maturity. My EE ladder I built in the 90s is collapsing bond by bond every 2 months.
rhoptry
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Re: EE paper bond conversion and Tax implications

Post by rhoptry »

I've found that one does not need a death certificate if one's intention is have the bond held by Treasury Direct until cashing out. I recently sent in several paper bonds that I was a co-owner (OR between names) with one of my deceased parents. I did not supply a death certificate. I didn't ask for the bonds to be converted to ones in my name. When they matured a few months later, they were automatically cashed and the money deposited in my bank account.
Co-owner is co-owner, either party can do what they wish with the bond. But one does need a certificate to register a co-owned bond in one name alone. The instructions at Treasury Direct are a bit vague.
tj
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Re: EE paper bond conversion and Tax implications

Post by tj »

Why convert them? Why not just cash the paper bonds at your bank if that's what you want to do anyway?
tibbitts
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Re: EE paper bond conversion and Tax implications

Post by tibbitts »

sometalk wrote: Mon Sep 13, 2021 8:42 pm Bogleheads,

Recently DW was given a few EE paper bonds by family, all of which have matured. All of the bonds have DW as a co-owner, some with a deceased grandparent and others with a living parent. We were thinking of converting all of them to electronic EE bonds and then cashing them in. Had a few questions about the process and the tax implications of cashing them in.

- For the bonds where the DW is a co-owner with the deceased grandparent, we will need a certified death certificate of them, to send in to the treasury with the manifest for converting them to electronic bonds. Anything else we should be aware of? The tax implications of cashing these in should be straight forward, as DW is the only surviving owner so we will end up owing the taxes.
- For the bonds where the DW is a co-owner with the living parent, I believe it is a fairly straight forward conversion. Is there a way to guarantee that the tax liability of cashing these bonds in would be on us and not on the parent?

Considering nether I or DW have previously held bonds (EE or I) on their own, are there any other gotchas we should be aware of?
You haven't given enough information for anyone to be helpful. You should specify the exact maturity date of each bond.

I don't understand why you would want to convert the bonds. A co-owner can cash the bonds and as far as I know the 1099INT will be issued to that individual.
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Mel Lindauer
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Re: EE paper bond conversion and Tax implications

Post by Mel Lindauer »

Why go to thru hassle of sending them to TD, only to have them redeem them? Simply go to your bank and redeem them there and save the hassle. (Either co-owner can redeem the bonds and the one who redeems them will get the 1099.)
Best Regards - Mel | | Semper Fi
SR II
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Re: EE paper bond conversion and Tax implications

Post by SR II »

My mother died 25 years ago. A month ago, I cashed in several matured EEs she bought with me as co-owner. I cashed them in person at my bank with no problem; no death certificate was required since I was the co-owner. The bank will issue a 1099 for the interest at the end of the year and I'm responsible for the taxes.
Topic Author
sometalk
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Joined: Thu Jul 20, 2017 9:38 am

Re: EE paper bond conversion and Tax implications

Post by sometalk »

Thank you for all the replies. You folks are right, not sure why we are complicating this process when every single bond has matured. We will ping our bank to see what do we need to do cash in these bonds.

Thanks again.
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