What Happens to the Treasury Bonds of the Deceased?

by Cindy Quarters

When the owner of a Treasury bond dies, the U.S. Treasury has specific rules established regarding the disposition of such bonds. What happens to the bonds depends on factors such as how the bonds were held, whether or not there was a will, and how much the bonds were worth when considered altogether. Taxes will be due at some point, depending on the disposition of the bonds.

Single Owner

If the bonds list only a single owner, when that person dies the bonds belong to the estate. A court representative can cash the bonds and distribute the funds to the estate, or the uncashed Treasury bonds may be distributed to the beneficiaries of the estate. If the court is not involved, the person legally entitled to the estate can apply to have the bonds put into her name, at which point she becomes the sole owner.

Two Owners

If there are two owners listed on the bond, the surviving owner automatically owns the bonds. The bonds will bypass the estate, probate or any other legal procedures. The second owner can simply keep the bond as it is, or he can cash it in as the sole owner. He can also request to have the bond reissued. If he chooses to have it reissued, he can either be listed as the sole owner, or he can name a second person to be listed on the bond with him.

Two Deceased Owners

When treasury bonds list two owners, and both have died, the bonds belong to the estate of whichever owner died last. The bonds are then handled the same as if they belonged to a single owner and are treated accordingly. If both owners die at the same time, the bonds are treated as if they belonged to a single owner and had no second owner listed, which causes them to pass to the estate of the owners.


When the decedent’s final taxes are filed, the person handling his affairs can choose to report all interest earned on the bonds up to that point, decreasing future tax liability for the new bond owner or owners. When the new owner redeems the bond, he is responsible for paying taxes on the interest earned by the bonds in the year in which she redeems them. If any interest was previously reported on the previous owner’s tax return, he can exclude that amount.

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