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My late wife bought some Savings Bonds before we married.* The 30 yrs for earning interest is almost up, and I am in the process of cashing them it and distributing the proceeds to her two sons. In her will, she grants to me anything not in her trust, and the Savings Bonds are not in her Trust. Am I correct that this is an inheritance to me and is therefore nont taxable (We are not even close to $5 million.)?

When I give the money to her two sons, is that counted at as gift within the limits of giving gifts for tax purposes? The total will be about $8,300 and half will be considerably less than the annual limit for gifts.

Before my wife's death we gifted our home to her oldest son and her little business (a cottage LLP) to her youngest son, all done by our lawyer for "geriatrics." We gave her car to a lady that helped take care of us. I currently live in a continuing care facility.

* Yes, I have a document from the county giving me access to $20,000 of her estate. Yes, I have filled out the Treasury form and gotten the Medallion signature (Since my wife is deceased, cashing in must be done by the Treasury and not a bank). For good measure I have enclosed with the Savings Bonds, the form, an "original" of the death certificate and a copy of our wedding certificate (which I am amazed I could find) along with a copy of the county document and, of course, the Savings Bonds. Hopefully, this will do it.

brucedoe
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Savings bonds are treated differently than other inheritances. Deferred interest from up to 30 years becomes taxable in the year the bonds are cashed. Many other assets avoid taxation on the appreciation during the decedent's lifetime because of the step up of capital gains valuation to the date of death. Not this asset. A majority of the value of this inheritance is fully taxable now. Treasury will enclose a Form 1099-Int with the gross proceeds when they cash the bonds per your request.

Perhaps you will want to limit your gift to your sons to the proceeds of the savings bonds after the deduction of funds to pay for federal and state income taxes.

Bill Patch
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WPatch

You bet I will as I am cashing them at their request.

brucedoe
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