When you have retirement accounts with a private financial institution, you can designate beneficiaries for the account. Some financial institutions also allow Pay On Death (POD) or Transfer On Death (TOD) designations for non-retirement accounts. After reading the previous post How To Grant Transact Right on I Bonds to the Second Owner, someone asked whether it’s easier and better to set up the I Bonds in TreasuryDirect with a beneficiary as opposed to a second owner.
Per Holding, Not Per Account
One difference between TreasuryDirect and other financial institutions is that the beneficiaries and the second owners in TreasuryDirect are set at the holdings level, not at the account level. Theoretically, within the same account, you can hold some I Bonds without any second owner or beneficiary, some I Bonds with Person A as the second owner (“you WITH A”), some I Bonds with Person B as the second owner (“you WITH B”), some other I Bonds with Person C as the beneficiary (“you POD C”), and yet another set of I Bonds with Person D as the beneficiary (“you POD D”), and so on. Even though you may not need this much granularity, you can’t simply set a second owner or beneficiary for the entire account.
Only One Person On Each Bond
Each I Bond holding allows only one second owner or beneficiary but not both at the same time. This second owner or beneficiary must be a person, not a trust or a charity. If you’d like to leave your I Bonds to multiple people after you die, you must make separate purchases and name a different person for each I Bond.
No Effect On Purchase Limit
Naming someone as the second owner or beneficiary doesn’t affect their annual purchase limit. They can still buy $10,000 in their own account.
After You Die
After you die, your second owners and/or beneficiaries need to contact TreasuryDirect by phone or email, effectively saying:
The owner of this account died. I’m the [second owner or beneficiary] of some bonds in the account. Please give those bonds to me.
If your beneficiary has their own TreasuryDirect account, you can let the beneficiary see which I Bonds they’re a beneficiary of by granting them View rights on those I Bonds. The process to grant View rights to the beneficiary is the same as the process to grant Transact rights to the second owner, as I showed in the previous post. You also have to do it bond by bond.
After your second owner or beneficiary inherits your I Bonds, they can name a second owner or beneficiary again on those inherited I Bonds.
Simultaneous Death
If both you and your second owner or beneficiary die at the same time, the I Bonds will go to your estate. This may require probate. If you’d like to avoid probate, name someone who isn’t likely to die at the same time as you, such as an adult child as opposed to your spouse. They’ll get an early inheritance when you die, and your surviving spouse will live on other assets.
Second Owner = Beneficiary + (optional) POA
Whether you should set up your I Bonds with a beneficiary versus a second owner depends on whether you want to let someone transact on those bonds on your behalf when you’re still living. A beneficiary can only be granted View rights. A second owner can be granted either View or Transact rights. In a sense, the second owner with Transact rights is like a beneficiary plus a power of attorney. The second owner with only View rights can’t do anything more than a beneficiary.
| Beneficiary | Second Owner | |
|---|---|---|
| Set on each bond | Yes | Yes |
| Receive bonds after your death | Yes | Yes |
| Can be granted View rights | Yes | Yes |
| Can be granted Transact rights | No | Yes |
Primary Owner Rules Supreme
As the primary owner of the I Bonds, you can change the arrangement at will. You can add or remove a beneficiary or a second owner at any time. If you started with a beneficiary and now you want a second owner, you can remove the beneficiary and add a second owner. If you started with a second owner and now you want to downgrade to a beneficiary, you can revoke the Transact rights or remove the second owner altogether and add a beneficiary. It’s all up to the primary owner. See How to Add a Joint Owner or Change Beneficiary on I Bonds.
Reference: Registering a Savings Bond: Series I
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Mark L says
Is there a tax advantage for the case of having a co-owner? If the owner passes away the ownership is transferred to the co-owner and taxes can be continued to be deferred. Can the same be been done with a beneficiary or will the owner’s estate or beneficiary have to pay taxes at time of inheritance?
Harry Sit says
The treatment after death is the same whether you have a second owner or a beneficiary. The beneficiary can also keep the bonds and defer the taxes until the bonds mature or are redeemed. The owner’s spouse or estate can choose to include the accrued interest up to the owner’s death on the owner’s final tax return. If they make that choice, the beneficiary will pay taxes only on the interest earned after the owner’s death, but the beneficiary will have to remember how much interest was already accounted for because the 1099 will include 100% of the interest. See pages 8-9 in IRS Publication 550.
https://www.irs.gov/pub/irs-pdf/p550.pdf
MHB says
Hi – I see where I can add a beneficiary in my account but I do not see the option for 2nd owner. I have never owned before and bought $25 last night to test I set-up account including bank info correctly and went to add 2nd owner (my husband) this morning and did not see that option so I did add him as a beneficiary and the account name for this transaction now has my name POD his name. I bought the remaining $9,975 this morning and was able to select that account but can’t find secondary owner option. He is going to open his account account and buy max $ and we would want to do same and once he has account I can give him view access to mine and versa-versa but would prefer to use second owner. Thanks for any help you can provide.
Harry Sit says
When you buy I Bonds you’re asked to create a new “registration” or pick an existing registration. You have three radio buttons for the new registration: Sole Owner, Primary Owner, or Beneficiary. Choose the second radio button (“Primary Owner”) when you want a second owner. Enter your name and information as the “first-named registrant” and enter the second owner’s name and information as the “second-named registrant.” It’s the same way when you added a beneficiary except you selected the third radio button (“Beneficiary”).
MHB says
Question regarding annual max purchase. As I understand it, individuals can buy the $10k plus the $5k via tax refund for total $15k per year. If my husband buys $10k as an individual (and maybe additional $ via refund), can I also gift him additional $10k in same year.? Thanks.
Harry Sit says
The maximum purchase using the tax refund is $5,000 per tax return. If you file a joint return, you’re still limited to $5,000. I Bonds purchased as a gift count toward the gift recipient’s annual purchase limit. It’s the same as gifting cash and having the recipient buy the bonds.
MHB says
Hopefully last question. For those who own these bonds, how do you best track and account for them in your overall portfolio? I added manually into my Fidelity Full View as taxable investments and labelled them as I Bonds 2021 to offset the decrease in the account where the $ came from. to purchase. Anything else I should be doing? Thanks.
Harry Sit says
Manual updates in Full View works. Some people use a spreadsheet.
Mike Quinn says
My wife and I are purchasing $ 10,000 each of I Bonds. Since, 10K is Mac per Social Security Number; if we designate each other as Beneficiary or Second Owner, does that preclude the other from buying their 10K? I would think the Beneficiary designation would allow us each to buy the 10K whereas the Second Owner would mean we couldn’t each purchase 10K.
Our goal, for as long as rates are high is to buy 10K each for each calendar year
Harry Sit says
The quota is tracked only on the primary owner. Being a second owner or a beneficiary doesn’t affect it.
linda says
Is it possible to register my husband as second owner, then my mother as beneficiary?
don’t see there’s an option to do so, or just I haven’t figured it out?
Thanks
Harry Sit says
Not possible. You can appoint only one person. The second person can appoint their own second owner or beneficiary after you die.
linda says
Thanks, Harry:
But I worry about: what if both of us(being second owner or beneficiary) die at the same time?
thanks
Harry Sit says
You’ll have to live with that limitation. If both of you die at the same time, the bonds go to your estate. Your will takes effect.
Pete Griffin says
So if you have a stepdaughter who has 10k in i bonds and her sister as the beneficiary both die at the same time then her father can jump in and take half of the ibonds? but by the time it transfers out of treasury direct the legal and court expenses will drain the funds so get a will? But a will can be contested …and this will drain the funds too. Treasury Direct needs to let you add a secondary and third beneficiary. if so buyer beware of risk.
Rick B. says
I’m trying to figure out how Series I pay-outs happen. They accrue interest annual, but do they only pay out when you redeem the bond. So, if I hold it for 7 years, I’ll get the value of the original bond, plus the sum of the interest for 7 years. Or, do they pay the interest annually? I believe it’s the first, but I’m trying to figure out if I could use Series I to set up an annuity stream in the future.
BTW – this is super helpful site!
Harry Sit says
No payout until you redeem but you don’t have to redeem the whole purchase. So create any payout you’d like yourself.
RAY BARSKUS says
THIS IS A VERY HELPFULL SITE
Allie says
Hi, Are there restrictions on who one can designate as a second owner – does it have to be a spouse or can one designate any person (say, grown son/daughter)? I only recently discovered your site and find it so helpful! Thank you!
Harry Sit says
No restrictions. Need Social Security Number.
Sam says
I have set up a login on treasury direct website with my details (ssn etc.). For my wife and I to avail of the full quota (10k each= 20K for 2021) do we need separate accounts (and login credentials) on treasury direct website. We file our taxes as ‘married filing jointly’
Harry Sit says
Yes, separate accounts. Then you add each other as the second owner when you buy bonds. Grant each other Transact rights after those bonds show up in the account.
Sam says
@Mike and @Harry. Got this set up along with the 10k (for each)purchases for 2021. Thanks for the quick replies.
Mike Quinn says
That is exactly what we did….10K each for my wife and I. We DID create 2 Different Log in and Accounts (your account number is your “User Name”)
We also designated each other as Secondary Owner and no problem. We also file Married Filing Jointly so we are identical to your situation and no problems at all
Get it set up before 12/31 if you plan on buying another 20K in 2022, as we will be doing
SR says
We already maxed out 10K each for myself, my wife using separate accounts and 2 of my minor kids (linked my account) totaling 40K. Can I still open account using my trust as an entity and buy more I bonds for 10K or probably not possible because it is only allowed 10K per each SSN. Thanks.
Harry Sit says
Yes, please read Buy More I Bonds in a Revocable Living Trust for more on buying in a trust. Today is the last day to buy for 2021.
Larry S Norwood says
How can I add an additional owner for an I Bond after initial purchase?
Thanks
Harry Sit says
Until I write a new post with screenshots, please follow the steps here:
https://thefinancebuff.com/grant-transact-right-second-owner-treasurydirect.html#comment-28159
Harry Sit says
New post is up: How to Add a Joint Owner or Change Beneficiary on I Bonds.
Peggy says
Warning — Do not buy IBonds on Dec 29, 30 or 31st. Buy several days in advance. The Treasury can take 3 days to issue bonds. You will lose out on buying bonds for a year. I lost out on buying IBonds for 2021 because my Dec 31, 2021 purchase date was changed by TreasuryDirect to an issued date of Jan 3, 2022. Note that today is a weekday. It is not a federal or bank holiday. This time lag happened in several years, but I had not waited to the last day of the year.
PEGGY says
Treasury Direct does not use “and” “or” in registrations. They use “with”. What does that mean? Peggy with Jack…Is this a joint ownership with each having 100% rights? Thanks
Harry Sit says
WITH means the first person is the primary owner. The rights aren’t equal. The primary owner can remove or replace the second owner without consent.
Jess says
I am the second owner on some I bonds. Am I able to redeem the bonds and pay the tax? Or does the primary pay the tax no mater what? Can you change the primary owner?
Harry Sit says
Assuming you’re talking about bonds in a TreasuryDirect account, not paper bonds, the primary owner will always pay the tax even when the second owner redeems the bonds. The primary owner can transfer the bonds to a different person but it will trigger taxes on interest accrued up to the time of transfer.
Jacquie Traub says
Hi Harry,
Thank you for all your wonderful articles on both I-bonds and so many other topics. I was excited to subscribe to you newsletter!
Do you know if you can make a POD/Beneficairy designation on an individual Treasury Direct account as follows:
“John J Smith as trustee for the James T Smith Living Trust, dated September 10, 2010”
(where John J Smith is the successor trustee of the James T Smith Living Trust.)
Harry Sit says
You can’t. The beneficiary has to be a person, to receive the assets for himself or herself, not on behalf of a trust.
Sean says
I have Series I Bonds that were from a refund of a Married Filing Jointly tax return, and then sent to TreasuryDirect to be converted to electronic. The Registration appears as Me XXX-XX-XXXX OR Spouse XXX-XX-XXX. Is this the same as the Second Owner “WITH” designation? If not, how so?
Sean says
Nevermind…I see you addressed this question in this post:
https://thefinancebuff.com/i-bonds-add-joint-owner-change-beneficiary.html
Thanks!
mmt says
What does Treasury Direct do when a gift owner refuses to make a treasury direct account? Can the funds be retrieved?
What happens when an account owner dies? And beneficiaries don’t know they are now owners.
Do orphaned bonds revert to the treasury?
Harry Sit says
They hold the bonds as unclaimed assets? They already have many unclaimed paper bonds. Don’t buy unwanted gifts. Tell your beneficiaries.
mmt says
Don’t regular investment custodians have to reach out and find beneficiaries?
Peggy says
Can a person have their own account as a primary owner and also be the secondary owner on multiple accounts. I have my own account with my husband as second named registrant and vise versa. Can I also be the second named registrant on my mother’s account?
Harry Sit says
A second owner is just like a beneficiary with the possibility of being granted the optional Transact right. You can be named as the second owner by as many primary owners as they please.
KimoL says
I am new to your website/blog – it is awesome. After reading one of your articles my Wife and I just bought on the same day the max $10,000 of I-Series bonds thru Treasury-Direct.
Ideally, we both want to add each other as Second Owners vs. just Beneficiaries.
However, I want to be sure that in doing so neither of us run any risk of somehow then being in violation of the above mentioned maximum $10,000 limit? I am near positive we will not be but would appreciate any confirmation you can provide. Thank You!
Harry Sit says
Being named as a second owner or beneficiary doesn’t affect your annual purchase limit.
KimoL says
Thank You!
Lisa says
Hello and thank you for the informative column. I would like to buy the maximum bond amount, 10K. I have three children. Is it possible within my account to buy three separate bonds on the same day in the following increments: 3325, 3325 and 3350 – thereby allowing me to leave (almost) equal amounts to each child? Thank you in advance for your advice.
Harry Sit says
I never placed multiple orders to execute on the same day but I don’t see why you can’t. If you’re concerned the system may be confused by the multiple orders, you can also schedule the three orders to different days, for example, 4/25, 4/26, and 4/27.
mmt says
Maybe buy 10K for each child?
Lizzie says
Can you change multiple i bonds to the same beneficiary/ registration all at once or do you have to do this for each one separately?
Harry Sit says
You can make changes to multiple bonds all at once. The view or transact rights have to be granted one bond at a time.
Lizzie says
Can you designate a minor child as a beneficiary or coowner? Issues with this?
Harry Sit says
You can. They only ask you to give the name and social security number, not date of birth.
Leni says
I understand that for paper I-bonds you have to redeem the entire I-bond.
But for electronic Ibonds, you can you redeem any amount that you like. Are both statements correct?
Harry Sit says
That’s correct. You can redeem any partial amount over $25 from a bond in your online account and the bond must have at least $25 remaining.
Judy says
If I buy a gift iBond for my daughter and put her infant son as the beneficiary, can my daughter redeem the bonds towards his college costs when he’s 18 without being taxed on the interest accrued?
Harry Sit says
She has to meet the income limit on the tax exemption on I Bonds interest for higher education expenses at that time. Assuming laws don’t change, the income limit for a full exemption in 18 years will be the inflation-adjusted equivalent of approximately $83k single, $125k married filing jointly in today’s dollars.
On the other hand, there’s no income limit in 529 plan distributions. If you contribute to your grandson’s 529 plan, the earnings will be tax exempt when the money is used for his college expenses.
Jonni Schmidt says
As the owner of an I Bond, can I claim the interest on my tax return yearly without actually pulling the interest out so that my co-owner does not have to pay any tax since he/she would be inheriting the bond and would cash it out? Do you receive an email at the end of each 6 months showing the interest that has been earned for that period only or would they wait until end of year and send total?
Harry Sit says
You can choose to claim the interest every year but you’ll have to calculate it yourself. They don’t send anything. See Taxes on I Bonds Get Complicated If You Go Against the Default.
Jen says
When someone inherits an IRA, they have 10 years to cash it out. When my beneficiary inherits my I-Series Bond upon my death, will the beneficiary have to withdraw the money all at once? Thanks.
Harry Sit says
The beneficiary can choose to hold the bonds for as long as they wish, up to the maturity date (30 years from the original purchase).
Stephen Minsky says
Theoretically can numerous I bond accounts be set up with say 10 adult grandchildren as the primary owners (I give them the money to set up each account). They would then name me as the co- owner and allow transaction rights . After 1 year or later could I then cash them in? Realize that 1099 would go to grandchild. Might be away around limits if you trust your grandchildren not to redeem bond before you do! I would of course reimburse grandchild for interest tags paid.
Affinity4Investing says
Do you also steal packages off of your neighbor’s porches as “away around” having to pay for things in an honest manner? What is it with people who come here to a great educational site to figure out ways to scam the system and then openly post about it?
Harry Sit says
If you want to give your adult grandchildren a boost, buy $10k worth of I Bonds as a gift for each of them. They’ll appreciate it. Asking them to act as a straw buyer feels fishy and icky. I would be upset if my grandparent proposed it to me. Responsible grandparents don’t drag their grandchildren into questionable schemes.
mmt says
We are discussion tax avoidance, not tax evasion. Perfectly legal by supreme court decision.
https://klasing-associates.com/tax-evasion-fraud-representation/tax-avoidance-vs-tax-evasion/