Co-owned bonds - if one dies, do they belong wholly to the other?

1 answer | Last updated: Oct 27, 2016
Louisville asked...

My aunt and I own bonds together. The designation is Ellen J. or Terry P. If one of us dies, will the bonds be a part of his/her estate? We also rent a lock box together, in the same "or" manner. My aunt keeps cash in the lock box. If she dies, will the cash become mine -- or will it be a part of her estate?

Expert Answers

Steve Weisman hosts the nationally syndicated radio show A Touch of Grey, heard on more than 50 stations, including WABC in New York City and KRLA in Los Angeles. He is a practicing lawyer specializing in estate planning and is admitted to practice before the United States Supreme Court. He's a public speaker and commentator who has appeared on many radio and television shows throughout the country, and he's the legal editor of Talkers magazine, the preeminent trade publication of talk radio. His latest book is The Truth About Avoiding Scams.

There are two answers to your first question. Full ownership of the bonds that are in your joint names will pass to the other joint owner without having to go through probate at the time of the death of the first joint owner. However, for estate tax purposes, the amount of the value of the bonds that would be included in the taxable estate of the first joint owner to die would be proportionate to how much that deceased owner contributed to the purchase price of the bonds. If your aunt entirely paid for the bonds and she were to predecease you, the entire value of the bonds at her death would be included in her taxable estate and subject to estate taxes if her estate were to be over the threshhold for estate taxes.

In regard to both of you being on the safe deposit box, you are not an owner of the contents of the box merely because your aunt has listed you as someone who has access to the box in which she keeps her cash. At her death, the cash in the box is part of her probate estate and her taxable estate. If you were to predecease her, none of the cash would be subject to your probate estate or taxable estate.