Splitting Savings Bonds after a divorce
Monday, January 30th, 2006
Categorized as: Savings Bond registration changes
I am recently divorced and we agreed to divide our EE bonds equally. This is included in the divorce decree also. My name and SSN are on the bonds and my ex-wife is listed as co-owner. How do we divide the bonds to ensure that the person cashing the bonds is responsible for the tax liability since my SSN is on all the bonds? And should I have my half reissued to remove my ex-wife's name?
Tom's response
You didn't ask, but I'm curious how you will divide them since they all are worth different amounts of money and could be paying different rates.
One possibility is to send them in and ask to have them all split into smaller denominations, with each of you getting reissued bonds with your own names on them. For this to work they have to be big enough to split, obviously. The smallest EE bond has a $50 face value.
The SSN on the bond isn't used for anything unless the bonds are lost. When a person cashes a Savings Bond, the 1099-INT tax form reporting the interest to the IRS has the SSN of the person who cashed the bond.
However, if you die and your ex-wife is listed as the co-owner of your bonds, she will inherit them from you and vice-versa. I'd recommend sending them in and asking to have them split, making each of you sole owners of your own half.
Use Public Debt Form 4000 to make the request.
It's important that you include a copy of your court order and a letter with the form that explains that you want to split each bond in half. Give the names, addresses, and SSNs for the new registrations.
Also say in your letter that you understand this will not create a taxable event for either of you, but if it will, not to proceed. This will make sure the bonds are processed correctly.
It sounds like you'd benefit from a weekend reading my book.
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Hi there…These questions are relative to form PD F 4000 E. My wife and I are owner/co-owner on all our EE bonds, we simply want to remove the "co- owner" status on each bond and replace it with a "beneficiary" status for each of our 2 grown children (seperate bonds for each of course). The "owner" on all bonds will remain the same. We are not sure what signatures are required . Also is certification by ANY Notary Public sufficient? The form indicates "financial institution". What financial institution is the form referring to? The number of bonds we are considering for these changes will exceed the spaces provided on pages 1 & 4, can we simply copy and include another page 4? To make life easier, can your office provide us with a sample for our situation? Are we correct in assuming that this is NOT a taxable event? We just want to make it easier for our kids to inherit without probate or controversy at the appropriate time …….Thank you very much.
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Ralph - This transaction will require the signatures of both you and your wife (the owner and co-owner of the bonds). A Notary Public is NOT sufficient, you need a "financial institution" - a bank, savings and loan, or credit union - to certify your signatures on the form. You can attach a list of the bonds to the form rather than listing them on the form; just write "see attached list" on the form. As long as you don't change the owner, this isn't a taxable event.
Tom Adams