Any Experience In Redeeming Electronic Ibonds From Treasurydirect (TD) For Deceased Account Holder?

Choice
  |     |   412 posts since 2020

With a personal $10K annual purchase limit on IBonds some of us were looking at various so-called other title vehicles for holding those e-ibonds. But we have noticed the exit strategy or means to redeem them is not the neatest. In fact a recent correspondence with Treasury had an email reply to a different email address than that provided to it and was not responsive as of this date. In addition to individual accounts which seems clear on redemption there is proprietorship (no beneficiaries allowed), trusts, and corporate forms.

The first hurdle is a sole proprietorship…how to redeem. Treasury provides the following in various places,

“(Electronic bonds: If the person who died has an online TreasuryDirect account, contact the Bureau of Fiscal Service directly. We will put a hold on the account and give specific instructions for the situation.)”

Specific instructions…what does that mean? A hold or freeze may not be of help either.

Q. Does anyone have any info/experience on how to redeem sole proprietorship IBonds of deceased when Treasury will not allow beneficiaries?

We are also looking at putting IBonds into revocable trusts…any experience there?

One in our group was thinking about trying to open a TD account, purchase a small amount and then redeem…however one cannot redeem for a year!

The bottomline in all of this is the ability of a married couple to significantly increase the individual cap on purchases to approximately $50k+ plus $5k tax refund….given the current ibond rate and expected much higher rate on November 1st…this is more than petty cash time!



Answers
Sherlock
  |     |   21 posts since 2020
I have no personal experience or knowledge of the information you are seeking but wonder if this is related:
https://thefinancebuff.com/buy-more-i-bonds-treasury-direct-trust.html
Buy More I Bonds at TreasuryDirect in a Revocable Living Trust

and https://www.thebalance.com/tax-consequences-of-savings-bonds-title-358070
How You Title U.S. Savings Bonds Can Have Big Tax Consequences
Choice
  |     |   412 posts since 2020
Thank you…very helpful. Two in our group tried to (finalize) a TD account set up …one for sole proprietorship and another for a trust….but each received, a form response saying “we can’t identify you” and submit form 5444…which they did…2-6 weeks was stated as expected response time. Message from here: don’t wait
Choice
  |     |   412 posts since 2020
Update. We initiated last week contact with Treasury rep who was very helpful. Today commenced proprietorship and trust test purchases (not the best day since purchases will be confirmed on first). So looks like we are on track and we will dump a total $10k in each while 3.54 rate still in effect. Will amend trust schedules to include proprietorship account…an assignment was not deemed feasible
Choice
  |     |   412 posts since 2020
Second Update…assignment and trust approach to sole proprietorship ownership of ibonds is not a viable exit strategy if bonds are owned at death (they go to his/her estate). Treasury says on its website to contact it if electronic bonds. Talking to Treasury, after an initial/tortious process involving recognition of a valid Treasury account registration for sole proprietorship, it seems that the redemption process is spelled out in their Form 5336…which is straight forward. $100k is max that can be used with that form! Currently the open item is…why doesn’t Treasury on their website refer to this form? Apparently they don’t have too many e-redemptions after death…hard to believe, but that is what they say. Consequently there seems to be a path forward.

Accordingly it looks like a couple can buy $10k for each, $10k for a joint trust, and $10k for one sole proprietorship…thus a minimum of $40k each year…(plus tax refund, etc.) is worth the effort when 3.54% is current 6month rate and forecasts of 4-5% on issues after November 1st for an annual combined rate of average of the two…12months max. Need to act soon! Have fun!


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