US Savings Bonds in Divorce

If you are going through a divorce and either you or your spouse have US savings bonds in divorce situation, there are some areas about US savings bonds in divorce cases that you should be aware of. Discussion of US savings bonds in divorce cases needs to be prior to settlement so that financial divorce settlements can include US savings bonds.

US savings bond values - use current value not face value

In order to include US savings bonds in divorce cases in the divorce settlement asset pool, the US savings bonds values need to be determined. A current value of the US savings bonds should be used for the US savings bonds values. The face value of the US savings bond or the purchase value of the US savings bond should not be used as the US savings bond values in divorce cases.

What are the current US savings bond values?

The current US savings bond values are the values of the US savings bonds if they were cashed in today. In another word, the amount of money the US savings bond owner would receive from his or her US savings bonds if they were cashed in today.

Receiving US savings bonds in a divorce settlement

If you are receiving US savings bonds as part of your divorce settlement, and you are named first on the US savings bonds, you may also want to have the US savings bonds titled changed to your name alone or with a co-owner or beneficiary. Having US savings bonds re-titled in a divorce settlement is not a taxable event and you will not be taxed. The divorce decree should specify exactly which US savings bonds go to which spouse.

Interests on the US savings bonds

When negotiating the divorce settlement, note that it is likely that the interest of the US savings bonds have not been reported as income. Interest on US savings bonds are often deferred. This means, if the US savings bonds were cashed and you have to pay taxes then the after tax value of the US savings bonds from your divorce settlement can be substantially less than the redemption US savings bonds value. If you are stuck in this situation having to pay taxes on US savings bonds interest, there are ways to avoid this.

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