Savings bonds can be transferred to new owners without probate if they were jointly owned or if the owner named a payable-on-death (POD) beneficiary to inherit them. These bonds can be jointly owned, or they can be registered in POD form, but not both; only sole owners can designate a POD beneficiary.
If a savings bond names only one person as the owner, then the bond becomes part of the estate when the owner dies. That means it passes to whomever is named to receive the bond in the will (or the residuary beneficiary if no one is specifically named in the will to receive the bond), or if there is no valid will, then to the heirs under state law. Below are more details depending on whether probate is necessary.
Note: For some forms discussed below, you'll have the option of using a notary or a certifying officer. For others, you won't have the choice, and you'll need to head to a certifying officer.
If you're conducting a probate proceeding for the estate, you can collect savings bonds and other Treasury Department securities using Form 1455, "Request by Fiduciary for Distribution of U.S. Treasury Securities." You'll list the "distributees" (the inheritors receiving the bonds) on this form. You'll also need to sign it in front of a certifying officer and send it to the Treasury Department along with a copy of your letters of administration (issued by the probate court) and a certified copy of the death certificate.
Note that if the value of the bonds in the estate exceeds $100,000, the Treasury Department insists that it go through probate; in most states, an estate that large would have to go through probate anyway.
If the estate doesn't go through probate, use Form 5336, "Disposition of Treasury Securities Belonging to a Decedent's Estate Being Settled Without Administration" to request that the bond be paid out to whoever is entitled to it. Include a certified copy of the death certificate. If the inheritors are claiming the bonds with a small estate affidavit, include a copy; if you're using summary probate procedures, include a copy of the probate court's order.
The inheritors can then do the following:
If a bond was registered in the names of two people, the survivor automatically inherits it when the first owner dies. Probate won't be necessary. Electronic savings bonds registered under co-owners will say "Name 1 with Name 2," while paper bonds registered under co-owners will say "Name 1 or Name 2." (See the "two owners" section of the Treasury Direct website.)
Example: Kiley and Amina co-own a paper savings bond worth $10,000. The bond is registered "Kiley Adams OR Amina Ahmed." When Kiley dies, Amina automatically owns the savings bond alone. The bond won't need to go through probate.
Savings bonds are often registered in beneficiary form, which means that the owner named a payable-on-death (POD) beneficiary to inherit them. These bonds name a beneficiary under both the owner and beneficiary's name like this: "OwnerName POD BeneficiaryName." (This is shorthand that means "OwnerName payable on death to BeneficiaryName." See the "owner and beneficiary" section of the Treasury Direct website.) When a bond is registered so that it is payable on death to a specific person, probate won't be necessary.
Example: Reggie owns a savings bond with a named beneficiary, his daughter Esme. The bond is registered under "Reggie Frey POD Esme Frey." When Reggie dies, the bond is automatically transferred to Esme. The bond won't need to go through probate.
When you inherit a U.S. savings bond because you were the co-owner and the other owner has died, or because you were the named POD beneficiary, you essentially have three options:
You can cash in an electronic savings bond on Treasury Direct (the U.S. Treasury Department's website for purchasing securities directly from the U.S. government). If you have a paper bond, you can cash it in at some banks—call ahead to find out whether they will, whether they have limits, and what documentation you'll need to provide. You can also cash in a paper bond with the Treasury Department by filling out Form 1522. You'll need to have your signature notarized or certified.
Both a paper bond and an electronic bond can be reissued on the Treasury Direct website; you will need to create an account.
However you inherit the savings bond, don't forget that you'll need to report, as taxable income, the interest earned on the bonds for the year the bonds are redeemed, disposed of in a taxable transaction, or reach final maturity, whichever occurs first.