Bequeathing US Savings Bonds

My dad is 92 and in pretty good health and lives in an assisted living apartment. He owns several old series E bonds. Should he cash the bonds in or leave them to be cashed after his death? He is widowed and there are three of us children. I have Power of Attorney. He doesn't need the money now, but might later on. Tom's response First, are they still paying interest? If not, you should redeem them. If your dad likes Savings Bonds you can just buy new ones. Save back enough money to pay the income tax. He officially owes income tax in the year the bonds reached final maturity, but as a practical matter the IRS doesn't know about the interest until you redeem them. If there's a large amount, however, you might want to file amended returns for the last three years to average the income out. If they are still paying interest, there's still good reason to consider rolling them over into new bonds. When you do this your dad will owe tax on the interest, but as long as his tax rate is lower than the rate of his heirs it makes good sense. If he doesn't pay the tax on them now or on his final return you will at your rates - there's no way to get out of it. You'll want to do a few each year rather than all of them at once to keep his income down. If you cash them all at once you'll cut into his social security income and you could bump him into a higher tax bracket. For additional information, see Bequeathing Savings Bonds on our web site.