US Savings Bonds

Question: proper way to handle taxes on inheritence of Savings Bonds?

On this particular estate, there are a bunch of Savings Bonds that will pay over $200000 in interest when cashed in. I don’t know if the taxes should be paid by the estate before the distribution, or by the heirs.

I think that if you cash in stocks after the death of a person, the heirs pay tax on the improvement in value between the death and the redemption, plus any interest or dividends that happen after the death. The bonds were really worth almost every bit as much at the time of death as when they were redeemed, but no tax is paid until the bond is redeemed… so?

Any help?

Answer: Hello Again Paul S, I’m the Savings Bond Guru from SavingsBonds.com – I hope I can help you with your question.

I just answered your other question, nearly identical to this one however I’d like to add one more point.

The Savings Bonds can be valued (probated) as of the date of death and the taxes paid on the interest earned at that time by the estate. However, you then need to keep track on all those bonds how much in taxes were paid and down the line when they are cashed in, need to prove the difference in the value in the future, compared to the probated value, is the only taxes due.

Its a complicated issue and thats why I highly recommend speaking to a CPA. If you still need to have them valued as of the person’s date of death, we do offer a service for that kind of situation.

If you have any further questions, you can contact me directly thru this Yahoo Answers account!

Good Luck,
-The Savings Bond Guru