Dear Mr. Premack: A few weeks ago your
column said that stocks cannot be held in "transfer of death". Does that
apply to savings bonds? If the owner of a savings bond has died and has
no living relatives, who can claim the bond? NCO and DJA
A saving bond, though issued by the federal
government, can be controlled by the bond’s owner. When the bond is
issued, you have the option of putting it into your sole name or listing
another person as co-owner.
The federal government does not use the
phrase "transfer on death" but listing a co-owner has the same effect:
the bond belongs to the survivor when either listed owner dies.
The survivor can redeem the bond or have it
reissued in his/her sole name. TreasuryDirect requires a death
certificate and a reissue request on their form PD F 4000, which can be
submitted through your local bank (if they offer that service) or
through the Federal Reserve Bank in Minneapolis.
If you do not list a co-owner, then when
you die the bond becomes part of your probate estate. Hopefully you have
a Will that clearly identifies the individuals or charities to whom you
want the bonds to pass. If so, the Executor named in your Will can
redeem the savings bonds just as you could have while alive: by
endorsing the bonds as (for instance) "Bob Doe, Independent Executor,
Estate of Sam Roe, deceased." The Executor must provide a death
certificate and a Letter Testamentary issued by the probate court.
Creating a Will or a trust solves the
problem of having no living relatives because you know who is important
in your life. You may have no relatives (or none to whom you want the
bonds to pass) but you can explicitly leave the bonds to anyone you
choose -- close friends, charities or others. But you have to create an
estate plan to put make those wishes binding.
If you do not make an estate plan to direct
transfer of the bonds, then upon your death the laws of descent and
distribution give the bonds to your heirs-at-law. You said you have "no
living relatives" but you may not be casting the net as widely as did
the legislature when it passed these laws.
For instance, if you have no spouse, no
descendants, no parents, no siblings, no nephews and no nieces, state
law then looks back two generations to your grandparents. If they are
not alive then all the descendants of all four of your grandparents are
considered to be your heirs-at-law. They can establish their claims
using a variety of courtroom procedures.
If you never made an estate plan and truly
have no heirs at law, then the bonds become subject to an escheat action
by the state, that is, the state may take action in court to claim
ownership of the bonds. Most people would consider that to be an
undesirable result, so you’d better be sure to prepare a binding Will,
trust or other legal plan with your attorney so you can direct the
outcome instead of leaving it to the legislature.