Nontransferable bonds, such as U.S. savings bonds, are issued to an individual and can't be transferred to another person. If you happen to find a bunch of old savings bonds secreted away somewhere, it's not a windfall for you. Those bonds can be redeemed only by the named bondholder. If the bondholder dies, the bonds become part of his estate. Perhaps, if you return some long-forgotten bonds to the owner, he'll give you a reward.
Unlike municipal and corporate bonds and others sold in the open financial market, nontransferable bonds cannot be traded in this fashion. These bonds are registered to a specific owner or co-owner at the time of purchase. While you can't sell them in the financial market, you can redeem them after holding them for one year. Depending on the bond, there may be interest penalties for redeeming it before five years of ownership.
U.S. Savings Bonds
A favorite investment for gifts, education or retirement, U.S. savings bonds are backed by the full faith and credit of the U.S. government. The only way you can lose with these bonds is if the government falls, in which case you'll probably have other things to worry about than your savings bonds. Bonds as of 2012 are issued in Series EE and I, with face values between $50 and $10,000. Interest payments on savings bonds are exempt from local and state taxes but not from federal taxes at redemption.
Purchasing Nontransferable Bonds
Although you could formerly purchase paper savings bonds at your local bank, that is no longer the case as of January 2012, although you can redeem them there. You can now purchase electronic savings bonds through the federal government's TreasuryDirect website. You receive your own account in which to purchase and redeem bonds. Electronic purchases are also available as payroll deductions from participating employers. You can still purchase paper Series I savings bonds, but only through your Internal Revenue Service tax refund. For either series, the maximum amount per purchaser is $10,000 annually, but the maximum for paper I bonds is $5,000 a year.
If you are a U.S. resident with a Social Security number, you can purchase savings bonds. If you are a U.S. citizen, you can buy these bonds even if living out of the country. You don't even have be over the age of 18. Not just individuals can buy bonds. Series EE bonds are available for corporations, fiduciary institutions, private and public organizations, trusts, estates and partnerships.
Although these bonds can't be transferred, they can be reissued. Use Form PD 4000, available from TreasuryDirect, to request reissue. Reasons for reissue include adding another person as a co-owner or beneficiary, or changing the current beneficiary to a co-owner; removal of a beneficiary by the owner; or a surviving co-owner having the bonds reissued in her name or with an additional person as co-owner or beneficiary. You might also want bonds reissued in cases of name change of the owner or beneficiary, due to marriage or divorce or legal change of name.
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