Most bond owners choose the second option. See below for information on this option. If only one person is named on savings bonds and that person has died, the bonds belong to his or her estate. If two people are named on bonds and both have died, the bonds belong to the estate of the person who died last. See below for information on this option.
Subsequent interest earned on the bonds is the responsibility of the new owner.
In the case of Series H bonds, if they reached final maturity in a previous year, the deferred interest would have been reported to the IRS as income for that year. Also, if bonds are cashed by a surviving co-owner, beneficiary, or person entitled, the financial institution cashing the bonds will report any accrued interest or deferred interest under that person s social security number, even though the interest may have been included on the decedent s final federal income tax return. You can contact the IRS for information about the procedure for deducting previously reported interest and the documentation that needs to be maintained to establish that interest was previously reported.