A savings bond entitles the holder to a certain amount of money. Typically, a bank will pay the money only to the person named on the bond. When that person dies, however, payment may be made to a person whose name is not listed on the bond. Depending on the situation, if a bond has come into your possession upon the death of the person who purchased it, you might will be able to cash the bond or have it reissued in your name.
Bonds sometimes have a "co-owner." If two people are named on a bond and only one of them is deceased, the bond belongs to the living co-owner. If only one person is named on the bond, or both of the co-owners have died, the bond becomes a part of the estate. From there, the executor of the estate typically will cash it and add the money to the estate. If the deceased owner or co-owners specified in a will that the bond is to go to a certain person, the manager of the estate will have the government reissue the bond in that person's name.
Whether the bond goes to a named co-owner or to the estate, there are two options. You may cash it for its current value or you may have it reissued it in another person's name. Reissuing may be the best option if the bond has yet to meet its maturity level or if you don't have an immediate use for the money.
Necessary Items for Cashing or Reissuing
If you are named on the bond as a co-owner, you may simply provide the bond and your photo ID to cash or reissue it. If the estate is handling the transaction, the administrator may have to provide the bond and an original certificate of death.
The interest earned on the bond is a taxable amount. If the estate is handling it, the amount will count toward the estate's taxes when filed. If an individual is handling the transaction, that individual is responsible for paying taxes on the amount earned.