Savings bonds are low-risk, long-term investments that have the unique ability to serve as a gift to a loved one. In essence, these bonds are loans to the U.S. government. Purchasers often acquire these bonds as part of an investment, future gift, or retirement plan. However, there are many caveats to transferring savings bonds in Texas, and as such, it is advisable to consult with an experienced estate planning attorney to avoid legal hurdles.
Types of Savings Bonds
The two primary bonds are Series EE and Series I.
- Series EE: these are low-risk savings bonds that earn a fixed interest rate until maturity at 30 years or when the owner cashes them. The treasury bond no longer issues these bonds in paper form, and purchasers must buy them electronically.
- Series I: these are low-risk inflation-protected savings products that earn interest.
Both of these bonds can finance education, supplement retirement income, and serve as gifts to loved ones. In addition to these bonds, owners may have other bonds that are no longer available and have likely matured.
Transfering Savings Bonds
Savings bonds that name one person as the owner will become part of the estate when the owner passes. If the owner’s will does not explicitly leave the bond to a particular person, it will pass through the will or under Texas state laws. Transferring savings bonds ahead of death allows for a streamlined transfer and may avoid the need for complicated probate proceedings after death.
According to Treasury Direct, paper savings bonds cannot be transferred. However, EE and I bonds are transferable with a TreasuryDirect account. Further, these bonds can be transferred to a new owner without probate if the bonds were jointly owned or if the owner named a payable-on-death (POD) beneficiary to inherit them. Transfers must meet the strict rules regarding certified signatures. An attorney can ensure that the process is completed correctly.
Jointly Owned and Named Beneficiaries
In cases where the original bond was registered in the names of two people, the survivor inherits the bonds when the first owner passes. The remaining owner can:
- Redeem the bond later;
- Redeem the bond at an institution that pays bonds; or
- Get the bond re-registered in the survivor’s name alone or with another.
Further, if the bond named a beneficiary, the beneficiary will inherit it upon the owner’s death. Similar to cases where there are two owners, the beneficiary can:
- Redeem the bond later;
- Redeem the bond; or
- Get the bond reissued in their name with a co-owner.
New owners must know the tax implications of securing a bond in their name. In most cases, the owners must report the earned interest the year they secure the bond benefits.
Contact a Texas Estate Planning Attorney with Further Questions
If you or someone you know have questions about purchasing, redeeming, or transferring a savings bond, the attorneys at McCulloch Miller, PLLC can help you protect your interests. In addition to savings bond transfers, our firm handles other estate and probate matters related to Texas wills and elder law issues. Contact our office at 713-597-7176 to discuss your elder law or estate planning matters with an experienced attorney on our team.