Co-Ownership vs. Beneficiaries With Savings Bonds

U.S. savings bond are a common vehicle for education and retirement planning.

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When you're purchasing U.S. savings bonds, the way you title them determines who actually owns them and can eventually cash them in. If you put your own name on the title or buy them as a gift for someone else in his name, that is sole ownership. Two people on the title are co-owners. You can add a beneficiary, but co-owners have different rights to the bond than beneficiaries.

Non-Transferable Bonds

U.S. Savings bonds are non-transferable, meaning that you can't simply give a bond to another person if it's in your name. It also means that if you come across old bonds in the attic or at a yard sale, you can't cash them in. The bonds belong to whoever is the listed owner or co-owner, or the beneficiary if the former individuals have died.

Bond Co-Ownership

When co-owned, bonds belong equally to both owners. Either person can cash in a bond without the other person's approval or knowledge. Upon the death of one owner, the surviving owner is the only owner of the bonds. The bonds do not become part of the decedent's estate. Only people, not organizations, can co-own savings bonds. Saving bonds cannot be titled in the names of more than two owners.

Bond Beneficiary

If the bond is titled for a beneficiary, it has one owner and one beneficiary. The bond is registered as payable on death, so when the owner dies the bond passes to the designated beneficiary. Bonds titled in this manner are part of the decedent's estate, although the "payable on death" provision means they do not go through probate.

During the owner's lifetime, she is the only person who can redeem the bond. As with co-ownership, organizations are prohibited from serving as beneficiaries. Only a person designated as a beneficiary can redeem the bond after the owner's death. While the bond may include information on it saying "Mail to" another individual, that person is neither an owner nor a beneficiary.

Reissuing a Bond

If you own a bond solely in your name and want to add a co-owner or beneficiary or change the beneficiary to a co-owner, you must have the bond reissued. To do this, fill out FS Form 4000, available online from TreasuryDirect. You can also use this form if you are the surviving co-owner and want the decedent owner's name removed from the bond. You can request to have the bond reissued in your name alone or with another co-owner or beneficiary. If you establish a revocable living trust and want the bonds reissued in the trust's name, use FS Form 1851.

Gifting Savings Bonds

Although you can give the gfit of savings bonds to adults or children, if a child is under 18, she cannot have a TreasuryDirect account without an adult custodian or parent creating a minor linked account for her. You must first hold onto the bond for five business days before being able to gift it to someone else. This wait time acts as a safety net for the Treasyry by giving your ACH debit time to clear before funds are transferred.