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Savings-Bonds-Alert: Inherited Savings Bonds

Tuesday, December 28, 2004

Inherited Savings Bonds

I am being appointed executor of my sister's estate. It consists of Series E and EE bonds. Some quit drawing interest ranging from 1996 to the present. Others will expire in 2005 and later. The estate is to be split 50/50 between my brother and me. We are both retired and in the 15% tax bracket. An accountant has recommended dividing the bonds and cashing a few at a time over future years. I would appreciate your suggestions. Tom's response If you and your brother are named on the bonds as beneficiaries or co-owners, the bonds won't have to be probated, which will simplify things for you as the executor. I agree with your accountant. Start cashing them in, starting with the ones that aren't paying interest anymore, in amounts that will keep you in the 15% bracket and that won't impact the amount of social security you get (if you have too much income they lower your social security benefit). You can use the Alert Recommendations in my book to figure out which ones to cash in first.


Anonymous Anonymous said...

What if the person who is the remaining co-owner is in a higher tax bracket (still working full time) than the decedent who had limited income?
Would it be better for the decedent
to take the tax ?

While I am here, Are co-owned bonds subject to state inheritance tax?
in PA it is 4.5%. If so, is it half the bond? what if the bond was a gift,
but had the decedant as the first owner?

2/28/2005 09:38:00 PM  
Blogger Tom Adams said...

Yes, it can be better to pay the tax due on the decedent's final tax return.

Here are the issues to consider. If you report the tax this way, you have to report all of it. Depending on the value and accumulated interest on the bonds, this could be a very large lump of income that will push the decedent into a high tax bracket anyhow.

How long will it be until the co-owner is in a lower tax bracket? Will the bonds still be paying interest then?

There's also the issue of the double taxation trap, which I discuss in my book.

Savings Bonds are subject to state inheritance taxes, but I don't know the specific rules for Pennsylvania. You should ask the lawyer who is probating the estate.

3/03/2005 11:16:00 AM  
Anonymous Anonymous said...

I ordered your book on
2-28-05 but have not received it yet.
Could you check on
alert -200502282228-544509
Express mail.

It will take 5 years before I could be
in a lower tax bracket so that I could cash the bonds in my ss #. I am wondering if I held onto the bonds until then, and cashed them under my number, how would a state track the inheritance tax, especially
since I would not be using the
decendent's ss# ?

3/05/2005 11:59:00 PM  
Blogger Tom Adams said...

Your book has been delivered. You need to ask the lawyer probating the Will about the inheritance tax issues.

3/07/2005 05:16:00 PM  
Anonymous Anonymous said...

Thank you
I am enjoying your book now.

I do not have a lawyer probating
the estate as I did not want
to pay over 10,000 to the lawyer.
I will have help of a cpa though
to complete the state inheritance
tax return.

3/07/2005 07:54:00 PM  

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