Dear Dr. Don, My grandparents had four Series E savings bonds. The registered owner of those bonds was either my grandpa or my grandmother. They have both died. Of their children, my aunt has died, but my 91-year-old mother is alive.
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The attorney for my aunt's estate and her stepson are trying to claim half of the bond's proceeds for my aunt's estate. Is there a federal law to stop them from taking half? And how can an attorney have legal right over my mother to cash these bonds? He is not the attorney of my grandparents' estate, which has been closed since the '90s. Any help would be appreciated. -- Linda Livid
Dear Linda, Your grandparents' savings bonds aren't part of a tontine in which the last surviving child gets all the money. Because the registered owners have both died, the bonds would be part of the estate of the last to die. The disposition of the savings bonds is controlled by either that person's will or, if that person died without a will, the state laws of intestacy in his or her state of residence. It seems entirely reasonable that your aunt's estate is entitled to half of the savings bonds proceeds, assuming your grandparents only had two children.
While your grandparents' estates, aside from these bonds, are settled, it's not unusual for an estate to have to be reopened to include assets that weren't reported in the original accounting of the estate, especially for items such as savings bonds.
In the absence of a living beneficiary, the disposition of the savings bonds depends on whether there was a court-appointed representative to the estate and whether that court-appointed representative has been discharged. The TreasuryDirect website has the specific information as to what is required to redeem savings bonds in these situations.
Since you say the bonds are Series E savings bonds, the bonds have matured and are no longer earning interest. If your grandparents deferred paying income tax on the interest income until maturity, there could be a big tax bill associated with cashing in the bonds. There is also the cost of meeting the requirements of the Treasury Department to cash in the savings bonds. Your stepcousin's attorney could be doing you a favor in arranging for the bond's redemption by navigating these requirements.