Who pays tax on inherited Savings Bonds?

I have inherited some E and EE bonds. If I cash some of them does the estate have to pay the interest earned on them? They were in my mother's name and Social Security Number. Tom's response If you are the Executor of your mother's estate, you have a lot of flexibility here. If not, you may be limited more by the Executor's plans than by tax or Savings Bond regulations. Whether you redeem the bonds or keep them, the estate's Executor can either have the estate pay the income tax on the interest earned through the date of your mother's death or allow the bond interest to pass to the heirs untaxed. If your mother's tax rate would be lower than that of her heirs (after considering the impact of the big lump of bond interest on her tax rate), it makes more sense for the estate to pay the income tax. If the heirs' rate is lower, it makes more sense for the heirs to pay it. Click here for more info on income tax rates. Of the four choices...

• redeem - heirs pay tax
• redeem - estate pays tax
• keep - heirs pay tax
• keep - estate pays tax

...only the keep - estate pays tax choice can be problematic. If you decide to do that, you need to put some effort into avoiding the double-taxation trap. Click here to visit the premier independent web site for SavingBond owners.