Savings Bonds After Spouse Dies: I Bonds, EE Bonds, and What to Do

Many widows discover their spouse held thousands — sometimes tens of thousands — in U.S. savings bonds. The transfer process is manageable, but the tax rules are counterintuitive: unlike stocks and real estate, savings bonds do not get a step-up in basis when a spouse dies. Missing this can cost you significantly. Not tax or legal advice — your specific situation matters.

Two Types of Bonds Most Widows Encounter

Series I Bonds

I Bonds pay a composite rate combining a fixed rate plus an inflation adjustment (reset every 6 months by the Treasury). The May 2026 composite rate is 4.26%.¹ I Bonds were popular during the 2021–2022 inflation spike when rates briefly topped 9%, so many households bought the annual maximum ($10,000 per person electronically, $5,000 in paper bonds via tax refund). Older Americans who bought I Bonds during that period hold them in TreasuryDirect accounts or as paper bonds received by mail.

Key redemption rules for I Bonds:¹

• 12-month minimum hold: I Bonds cannot be redeemed for the first 12 months after purchase. If your spouse purchased bonds within the last year, you cannot cash them out yet.
• 3-month interest penalty: If you redeem within the first five years, you forfeit the most recent three months of interest. After five years, no penalty.
• 30-year maturity: I Bonds earn interest for 30 years and stop earning after maturity.

Series EE Bonds

EE Bonds earn a fixed rate set at purchase. The key feature: EE Bonds issued after June 2003 are guaranteed to at least double in value if held for 20 years — an effective 3.5% annual return for a full 20-year hold.¹ EE Bonds also have a 12-month minimum hold and a 3-month interest penalty if redeemed in the first five years. They mature at 30 years and stop earning after that. If you find old EE Bonds issued before 1996, check whether they've matured — many older bonds are past their 30-year maturity and have stopped earning interest entirely.

Older Series E Bonds

Series E Bonds were issued from 1941 through 1980. All Series E Bonds have reached their final maturity date (the last ones matured in 2010) and have stopped earning interest. If your spouse held any paper Series E Bonds, they should be redeemed immediately — every day they sit in a drawer is a day they earn nothing and could be lost to fire or theft.

How Savings Bond Registration Determines What Happens at Death

Unlike retirement accounts (which use beneficiary designations) or joint bank accounts (which use JTWROS), savings bonds transfer based on how they are registered — the names printed on the bond or shown in TreasuryDirect. There are two registration formats that matter:

Co-Owner Registration ("John Smith OR Mary Smith")

If the bond is registered in both names with "OR" between them (co-owner format), the surviving co-owner becomes the sole and absolute owner of the bond upon the other owner's death.² No probate needed. You provide proof of the deceased co-owner's death (typically a certified copy of the death certificate) and the bond is yours to redeem or reissue.

Beneficiary Registration ("John Smith POD Mary Smith")

If the bond is registered with "POD" (payable on death) to a named beneficiary, the bond passes directly to that beneficiary — again bypassing probate.² The beneficiary provides a death certificate and their own identity documentation to claim the bond.

Solely-Owned Bonds (Only Spouse's Name)

If the bond has only your spouse's name and no co-owner or beneficiary, the bond must pass through the estate. For bonds valued at $100,000 or less, a surviving spouse can typically handle this through a simplified non-administered estate process (see below) without a full probate proceeding.

How to Claim and Transfer the Bonds

Electronic Bonds in TreasuryDirect

If your spouse held bonds in a TreasuryDirect account, the transfer process happens online. Under 31 C.F.R. § 363.44, when a TreasuryDirect account holder dies, the estate is entitled to the securities held in the account.³ As the surviving spouse (and typically the heir), you will need to contact TreasuryDirect to initiate the transfer. TreasuryDirect does not automatically transfer accounts; you must call or write to their Retail Securities Services to begin the process. Have the death certificate ready.

If you were already listed as co-owner or beneficiary on individual bonds within the account, those bonds can be moved to your own TreasuryDirect account. If you don't have one, create one at TreasuryDirect.gov before contacting them about the transfer — you'll need your own account number.

Paper Bonds: Co-Owner or Beneficiary

If the paper bonds name you as co-owner or beneficiary:²

• To cash out: Take the bonds (with proof of death if co-owner) to a financial institution that handles savings bond redemptions, or mail them to Treasury Retail Securities Services with a death certificate.
• To reissue in your name alone: You'll need a TreasuryDirect account. Reissued bonds are no longer printed as paper — they become electronic in your TreasuryDirect account. Submit through TreasuryDirect using FS Form 4000 (Request to Reissue).

Paper Bonds: Non-Administered Estate (No Probate, Under $100,000)

If the bonds are solely in your spouse's name and the total value is $100,000 or less, you can typically act as a voluntary representative without a court-appointed executor, using FS Form 5336 (Disposition of Treasury Securities Belonging to a Deceased Owner).⁴

• Complete FS Form 5336 in the presence of a certifying official (a bank officer or notary authorized for this purpose)
• Attach a certified copy of the death certificate for your spouse
• Mail to: Treasury Retail Securities Services, P.O. Box 214, Minneapolis, MN 55480-0214
• Processing typically takes 4–6 weeks

If the estate requires formal probate (bonds over $100,000 in solely-owned bonds, or complex estate situation), the court-appointed personal representative handles the bonds as part of the estate administration.

The Tax Trap: Savings Bonds Are Income in Respect of a Decedent (IRD)

This is the most important thing to understand about inherited savings bonds — and the place where most widows get surprised.

When you inherit a brokerage account holding appreciated stock, the cost basis resets to the date-of-death value. You can sell the stock the next day and owe no capital gains tax. This is the "step-up in basis" rule under IRC §1014.

Savings bonds don't work that way. The interest that has accrued inside a savings bond since its purchase date is classified as income in respect of a decedent (IRD) — income that the deceased earned but never recognized for tax purposes.⁵ There is no step-up. When you redeem the bond, you owe ordinary income tax on every dollar of accrued interest — including the interest that accrued during your spouse's lifetime.

Example: Your spouse bought $10,000 in I Bonds in 2021. They've grown to $14,200 by the time of your spouse's death in 2026. If you redeem them, you owe ordinary income tax on $4,200 of interest — at your new single-filer rates, potentially in the 22% or higher bracket.

The Critical Election: Report Accrued Interest on the Final Joint Return

Here is the planning opportunity that most widows miss. IRS Publication 559 (Survivors, Executors, and Administrators) describes an election that can dramatically reduce the tax impact of inherited savings bonds:⁵

If your spouse was reporting savings bond interest on a cash basis (deferring it until redemption — which is the default for nearly everyone), the executor or personal representative can elect to include all of the accrued interest through the date of death on your spouse's final Form 1040.

If this election is made:

• Your spouse's final return reports the accrued interest as income
• When you later redeem the bonds, you only owe tax on interest earned after the date of death — not the large amount that accrued during your spouse's lifetime
• If the final return is a joint return (which it almost always is — you can file jointly for the full year of death), that income is taxed at MFJ rates, which are significantly wider than your future single-filer rates

When this election makes sense: If your spouse held large savings bond balances with substantial accrued interest, and if your joint-year income is lower than your expected future income as a single filer (or vice versa), the election can shift a large taxable event to a more favorable tax year and filing status. A tax advisor can model both scenarios before your final joint return is due.

When to skip the election: If your spouse's accrued interest is small, or if your joint-year income is already high and you're already in the top bracket on the final return, the election may not help much — and you may prefer to let the bonds continue growing tax-deferred until you need the cash.

Should You Cash In or Hold the Inherited Bonds?

Once you've transferred the bonds to your name, you face a real decision: redeem now, or continue holding?

Arguments for cashing in (especially in the joint-return year)

• Use the joint-year Roth conversion window. The year of your spouse's death is your last year filing jointly with MFJ brackets. If you cash in savings bonds in that year, the interest is taxed at the wider MFJ brackets — and you can potentially combine this with a Roth conversion to get the most out of the lower brackets. See our Roth conversion strategy guide.
• Older EE Bonds near maturity. EE Bonds stop earning interest at 30 years. If your inherited EE Bonds are approaching or past their 30-year date, there's no reason to hold them further.
• You need the cash. If retirement income is tight and you need liquidity, holding bonds for tax reasons while drawing down other accounts at a higher rate may not make sense. Model the full picture.

Arguments for holding (especially I Bonds)

• Inflation protection is hard to replicate. I Bonds are the only investment that guarantees a real (above-inflation) return. If you're concerned about inflation eroding your purchasing power, I Bonds are difficult to replace with a comparable risk-free instrument.
• Continued tax deferral. As long as you hold, the interest compounds tax-deferred. The tax bill only comes when you redeem. If your future income is likely to be lower than today (after RMDs peak, for example), deferring may reduce the eventual tax rate.
• Avoid the 3-month penalty. If the bonds are under 5 years old, redeeming now forfeits three months of interest. Holding until the 5-year mark eliminates the penalty.

A simple framework

Continuing to Buy I Bonds After Your Spouse Dies

If your spouse was using their personal $10,000 annual I Bond purchase limit alongside your own $10,000 limit (a common strategy for couples), losing your spouse reduces the household's annual I Bond capacity from $20,000 to $10,000. You cannot maintain their purchase slot.

However, you may still have options: if you receive a federal tax refund, you can request up to $5,000 in paper I Bonds (separate from the $10,000 electronic limit), bringing your individual annual maximum to $15,000. And if you establish a revocable living trust, the trust can also purchase $10,000 per year — a separate entity limit.

IRMAA Interaction: Managing Bond Redemptions Near the $109,000 Threshold

Once you file as a single filer after your spouse dies, the IRMAA threshold drops from $218,000 (married filing jointly) to $109,000.⁶ Income above that triggers Medicare Part B and Part D surcharges. Savings bond interest counts as ordinary income and is included in your MAGI.

If you have a large savings bond position, consider spreading redemptions across multiple years to avoid pushing your MAGI above the IRMAA threshold in any single year. For example, redeeming $30,000 in bonds might generate $10,000 in interest income — enough to cross the $109,000 line if your other income (Social Security, RMDs, pensions) is already near it. A fee-only advisor who works with widows can help you model the right sequence.

Common Mistakes with Inherited Savings Bonds

Sources

1. TreasuryDirect — Series I Bonds. Current composite rate 4.26% for bonds purchased May–October 2026. 12-month minimum hold. 3-month interest penalty if redeemed before 5 years. 30-year maturity. Annual purchase limit: $10,000 per person (electronic) + $5,000 paper via tax refund.
2. TreasuryDirect — Inheriting Savings Bonds as a Named Co-Owner or Beneficiary. Co-owner recognized as sole owner upon death of the other owner. Beneficiary may claim bond upon owner's death. Reissued bonds become electronic (no new paper bonds issued). Proof of death (death certificate) required.
3. 31 C.F.R. § 363.44 — TreasuryDirect Account Owner Death. Estate entitled to securities in a deceased owner's TreasuryDirect account. Via Cornell LII.
4. TreasuryDirect — Non-Administered Estates. Surviving spouse has first priority to act as voluntary representative. FS Form 5336 used for settling non-administered estates (bonds $100,000 or less). Certifying official signature required.
5. IRS Publication 559 — Survivors, Executors, and Administrators (2025). Savings bond interest is income in respect of a decedent (IRD). Election to include all accrued interest on decedent's final return; transferee then reports only post-death interest. No step-up in basis for IRD items.
6. SSA.gov — 2026 Medicare Premiums and IRMAA Thresholds. Single-filer IRMAA threshold: $109,000 MAGI (based on 2024 income). First surcharge tier: Part B premium rises from $202.90 to $284.10/month. Savings bond interest included in MAGI.

Savings bond redemption rules and rates verified against TreasuryDirect (May 2026). Tax treatment (IRD, final-return election) per IRS Publication 559. IRMAA thresholds per SSA.gov 2026 Medicare premium tables. Values verified May 2026.