United States savings bonds
Many individuals own United States Savings Bonds – Series E, EE, H, HH or I bonds – tucked away, perhaps, in a bureau drawer or safe deposit box. Bonds are a savings tool used by millions of United States citizens – in part because of favorable tax advantages.
Advantages of estate gifts. Unfortunately, bonds may be subject to heavy federal income taxes and state and federal taxes in a person’s estate. Heirs generally owe income tax whenever they cash savings bonds, and estate taxes may take an even larger slice. For example, heirs who receive $100,000 in E or EE savings bonds from your estate may have to pay income tax on $50,000 or more of built-up interest. Furthermore, the full $100,000 could be subject to federal estate tax, leaving them with only a fraction of the bonds’ value.
To benefit both the Church and your estate, you can provide in your will or trust that savings bonds are to be left to the Church. This will enable the savings bonds to pass to the Church without tax, and the Church, as a qualified tax-exempt organization, will also owe no tax on the bonds when liquidated.
Savings bonds in lifetime giving. Many individuals would prefer to make lifetime gifts of savings bonds to assist the Church, but United States Treasury regulations restrict bond ownership to individuals and revocable living trusts. However, you could cash in the bonds, and making a gift of the cash proceeds from redeemed savings bonds – usually upon maturity – to the Church. If you itemize your tax deductions, you could then receive a charitable tax deduction for the cash gift proceeds.
Charitable gift annuity funded with savings bonds proceeds. One way to offset tax liability when you cash savings bonds – and create a lifetime income – is to enter into a charitable gift annuity or other life income gift arrangement that will provide future support for the Church and lifetime income to you or another, plus a charitable deduction that may eliminate all taxes from cashing your bonds.
Two general types of bonds are currently sold by the Savings Bond Division of the Department of Treasury: Series EE and Series I.
If you are interested in leaving the Church savings bonds in your will or living trust, please e-mail, call or write our office.