Establishing a Savings Bond Beneficiary

A savings bond beneficiary is often confused with the bond's "owner," but the two terms have different meanings. There are actually three ways to register US savings bonds: single ownership, co-ownership and beneficiary listing. All bonds must have an owner or multiple owners. Bonds may also have a listed beneficiary, or individual who will receive the income on the bond if the owner dies before the bond is cashed in.

Bond Owner

The bond owner is the person who purchases the savings bond and holds it during his or her lifetime. This individual is primarily responsible for decisions on cashing in the bond, selling the bond or other activities. This person is also responsible for naming a beneficiary or changing a beneficiary when needed. A bond can have more than one owner; this registration form is called "co-ownership." In a co-ownership situation, the split does not have to be even. The owners can determine which percentage ownership should be allocated to both individuals. However, once an individual is named an owner of the bond, that individual will have to provide consent on any changes in the bond's ownership or beneficiary designations. This is true even for a minority owner on the bond.

Adding or Changing a Beneficiary

You can add or change a beneficiary to any savings bond through a relatively simple and straightforward process. If the bond is an Electronic Savings Bond, you can carry out these steps through the Treasury Direct system. Simply log in to your account and click on "Manage Registrations." If you have a paper bond, you will need to file Public Debt Form 4000. If you are listing a beneficiary for the first time, your signature is the only one required. It must be certified by a bank or notary. If you are changing a beneficiary, the prior beneficiary must consent to the change. Both signatures will be required.

Beneficiary Rules

Nearly any individual can be named as a beneficiary. You have no obligation to name a spouse or child. An organization, or charity, cannot be listed as the beneficiary on a savings bond. Adding or changing a beneficiary is not a taxable event. This means it has no immediate tax implications for the owner or beneficiary named on the bond.

Importance of Naming a Beneficiary

If you are the owner of a bond, the bond is legally part of your estate. Upon your death, if no beneficiary is listed, the bond will pass to your estate for dissemination. This means the bond may be dragged into the probate process designed to verify your assets. You will not have absolute control over what happens with the funds unless you have a designated beneficiary in a legally enforceable will. To avoid all of these steps, you can simply name a beneficiary who receives P.O.D. (Payable On Death) benefits. Once you pass away, the bond is simply cashed out and profits are handed to this individual.

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