Transferring ibonds with joint owners to Revocable Living Trust for one owner

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Topic Author
masha12
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Joined: Tue Jan 24, 2017 2:34 pm

Transferring ibonds with joint owners to Revocable Living Trust for one owner

Post by masha12 »

Will discuss situation with lawyer, but I want to access the bogleheads knowledge base.

Situation:

Husband (H) owns paper Ibonds with him as primary owner and Wife (W) named as co-owner. (H's Ibonds)
W owns paper Ibonds with her as primary owner and H named as co-owner. (W's Ibonds)

H created revocable living trust (RLT) for himself. W does not have RLT and cannot create one.

Can H put H's Ibonds into RLT even though wife is named as co-owner?
Can H put W's Ibonds into RLT because he is co-owner?

The goal is to get ibonds out of each spouse's estate. What other options are there?

Thank you.
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HueyLD
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Re: Transferring ibonds with joint owners to Revocable Living Trust for one owner

Post by HueyLD »

In order to transfer paper savings bonds to a trust, you generally must include accumulated deferred interest in your gross income
However, you may continue to defer the interest if you meet certain criteria.

The criteria are spelled out in From 1851 Section 4. Carefully review the requirements in Sec. 4 and ask your attorney for guidance if necessary.

https://www.treasurydirect.gov/forms/sav1851.pdf
Topic Author
masha12
Posts: 112
Joined: Tue Jan 24, 2017 2:34 pm

Re: Transferring ibonds with joint owners to Revocable Living Trust for one owner

Post by masha12 »

HueyLD wrote: Sat May 07, 2022 4:00 pm In order to transfer paper savings bonds to a trust, you generally must include accumulated deferred interest in your gross income
However, you may continue to defer the interest if you meet certain criteria.

The criteria are spelled out in From 1851 Section 4. Carefully review the requirements in Sec. 4 and ask your attorney for guidance if necessary.

https://www.treasurydirect.gov/forms/sav1851.pdf
I think that is the very question I have. My understanding is that H can put bonds he owns into H’s RLT without having to to treat accumulated interest as income in the year they are put in the trust. My question is whether the same is true for bonds where H is the primary owner and W is a co-owner, or on bonds where he is just the co-owner.
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HueyLD
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Re: Transferring ibonds with joint owners to Revocable Living Trust for one owner

Post by HueyLD »

“(2) If the trust instrument provides that the reissued bonds or the proceeds from the redemption or disposition of those bonds must be distributed to you or your spouse, or held or accumulated for future distribution to you or your spouse, you will be treated as the owner of the portion of the trust represented by any accumulated interest on the bonds. You will be treated as the owner in this circumstance irrespective of the terms of the trust.”

What is your answer to this question? You and/or your attorney may be able to find the above provision in your trust.

If your trust states the above, your spouse’s personal savings bonds can be transferred without having to reporte accumulated and untaxed interest upon transfer.
Topic Author
masha12
Posts: 112
Joined: Tue Jan 24, 2017 2:34 pm

Re: Transferring ibonds with joint owners to Revocable Living Trust for one owner

Post by masha12 »

HueyLD wrote: Sun May 08, 2022 6:37 am “(2) If the trust instrument provides that the reissued bonds or the proceeds from the redemption or disposition of those bonds must be distributed to you or your spouse, or held or accumulated for future distribution to you or your spouse, you will be treated as the owner of the portion of the trust represented by any accumulated interest on the bonds. You will be treated as the owner in this circumstance irrespective of the terms of the trust.”

What is your answer to this question? You and/or your attorney may be able to find the above provision in your trust.

If your trust states the above, your spouse’s personal savings bonds can be transferred without having to reporte accumulated and untaxed interest upon transfer.

The trust is in the process of being drafted so I can have language added.

If this language is added, then H can deposit bonds that name W as owner and H as cowner into H’s revocable living trust, right? Or does W have to do it? (W is not competent to sign so it would have to be by POA and that adds another layer to this.)
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