I have 15 $100 Series EE U.S. Savings Bonds issued in 1995. My SSN is on the bonds. My name is listed in owner field but there is a caveat stating “Mail to XXXXX” and her address. She is the co-owner on the bonds (‘or’ person) and is my mother. I would like to change myself from owner to co-owner and make my grandson the owner. I have all his required information. He’s be one in two weeks. Would my mother, as current co-owner, need to sign any forms? She is in a nursing home and I’m her POA and sign everything for her. What do I need to do to make these changes? Thank you very much for your time and expertise in this matter.
Terry Says: OK, this is so complex that I turned to Jackie Brahney who runs the website www.Savingsbonds.com and is probably the world’s greatest authority on all things Savings Bonds. Here is what she had to say, while disclaiming any attempt to give financial advice. (That’s MY department!) But as you can see — and I have cut and pasted her response to me — this is not uncomplicated!
Terry, here are instructions on what can be done when converting paper to digital (aka electronic savings bonds) and how to avoid a potential tax situation for the daughter at this time.
Any registration changes to a paper bonds (using a FS400 form) will result in the issuance of digital (aka electronic) bonds only – not paper. An existing TreasuryDirect (TD) account must be either used or a new TD account must be set up to convert the paper into the electronic TD account.
Since the daughter is the primary owner of the paper bonds, she can conduct transactions (and/or registration changes) without the mother’s approval or mother’s signature. FYI- primary and co-owners have equal rights on paper bonds and either can cash in a paper bond without the other persons (i.e. mother’s) consent or knowledge.
However, BY REMOVING PRIMARY AND CO-OWNERS NAMES ENTIRELY OFF PAPER BONDS WHEN CHANGING REGISTRATION – IT WILL LIKELY CREATE A TAXABLE EVENT. (A FS 4000 form would be required when submitting the paper bonds to change registration)
To avoid a taxation issue, daughter should consider putting herself as Primary account owner and set up an a linked Minor account for the grandson (under 18 years old). See Smart Exchange and Manage accounts at Treasurydirect.gov.
Special Note: Minors may NOT open online Treasury Direct account, buy bonds, or conduct other transactions. The adult custodian, such as a parent, may open an online account for the minor that is linked to the adult’s online account. This person can buy securities and conduct other transactions on behalf of the minor, and hold the securities in the Minor linked account.
A Minor account is a custodial account and will be linked to the Primary account. The account is established by the primary owner for a child under the age of 18 IF they are the parent, natural guardian, or the person providing chief support. The primary owner may purchase, redeem, receive gift deliveries, and perform other transactions within the minors account. When the minor reaches 18 years old, they can establish their own Primary account, and then may de-link the account, and move the bonds to their own newly established Primary account.
Holdings in a Minor account are kept separately from Primary accounts. They can only be accessed through the Primary owners account. Note: Minor may not be subject to backup withholdings and must be a US citizen. [And here’s a note added by Terry: Bonds in a minor account can heavily impact the minor when applying for Federal financial aid in the form of student loans.]
The daughter should follow instructions on creating a new online TreasuryDirect.gov account and should view SmartExahange for all proper/required documentation for exchanging paper to electronic bonds (at TreasuryDirect.gov)
Here are some basic instructions with daughter as the primary owner (and linking grandson to the account) to avoid taxation issue AT THIS TIME:
1. If not already set up, daughter should open up a TreasuryDirect.gov account in her name. (NOT required to include mothers name on the Treasury Direct account)
2. Fill out the manifest (list of bonds) & review & follow all Smart Exchange instructions/rules, etc.
3. Make copies of all “active” savings bonds (no bonds can be past final maturity or close to maturing – not an issue in this case). Keep copies of actual bonds in safe place.
4. Mail in original bonds, manifest and POA (for mother – just to be certain) to: Treasury Retail Services, P.O. Box 214 Minneapolis, Minnesota 55480 (I suggest mailing all documents and bonds with receipt confirmation or tracking options, such as express or priority mail)
5. Once the Treasury Direct account is set up and activated, investor is notified, paper to electronic bond conversions can be completed and added to the acount, as well as creating the linked account in the Minors (grandsons) name. (Grandsons SSN will be needed).
[Note: JUST A THOUGHT the daughter MAY want to consider adding or granting “Transact rights” to the grandsons parents, IF appropriate???? Some relationship/trust variables would need to be considered as that individual/grantee can view and conduct transactions in the primary owners (daughters) account, such as full or partial bond redemptions. IF the daughter grants Transact rights to a second-named registrant (grantee), the account owner (daughter) assumes all tax liabilities for any redemption performed by the grantee. This is going in another direction Terry, but just wanted to let you know it’s an option. Again, keep in mind a taxable event may occur if/when the primary owners name is removed completely.]
There is currently a back log of over 40,000 bonds at the Treasury Department. The processing time to convert the paper to electronic bonds (aka digital bonds) is currently 15-20 weeks. Plan accordingly if bond proceeds are needed.