Originally created 08/17/97

Your money: Saving bond titles important



Q: My late husband and I purchased $290,000 worth of U.S. Savings Bonds Series EE from 1984 through 1989. All of the bonds were purchased either in his name, mine, or both names. I have no children and only two nieces.

Believe it or not, the attorneys with whom I have spoken do not seem to be knowledgable enough about savings bonds to suggest what I should do with the bonds or how to get them in the names of my nieces.

I'm particularly interested in what I should do with the bonds that matured after 10 years.?

A: I believe it. When it comes to attorneys, or savings bonds for that matter, nothing is surprising.

You'll have to get all of the bonds retitled. Your name should be listed first. Your nieces can be listed as either co-owners or beneficiaries.

It's important to keep in mind that if your nieces are listed as co-owners, they can cash the bonds any time they want without your consent, says Daniel Pederson, editor of U.S. Savings Bond, A Comprehensive Guide. As beneficiaries, they'll get the bonds after your death.

Deciding which option to select depends on your level of trust. However, you might want to consider having them listed as co-owners in case you became incapacitated. That way they'll be able to cash the bonds if you or they need the money.

To get the bonds retitled, you can request the necessary forms from the Federal Reserve Bank in Richmond, Va. The phone number is (804) 697-8370. The address is P.O. Box 85053, Richmond, VA 23285.

You can either send the forms and the bond certificates back to the Federal Reserve Bank in Richmond or walk them into a local bank that sells savings bonds.

If you use the mail, be sure to send the bonds certified, return receipt requested. If the bonds get lost, don't fret. Unlike cash, savings bonds can be replaced if they are ever lost, stolen or destroyed.

You seem concerned that the bonds you've owned for longer than 10 years have stopped earning interest. Don't worry. The Series EE bonds you bought in the 1980s reach face value after 10 years, but they continue to pay interest for 30 years.

You can find out the exact rates by contacting The Savings Bond Informer at (800) 927-1901.

Q: An article concerning the new capital gains tax rates stated that gains on the sale of investments held for at least 18 months would be taxed at a rate of 20 percent.

I thought I read earlier that gains from investments held for more than five years would be taxed at an 18 percent rate. Which is it?

A: They're both correct.

Capital gains on the sale of long-term investments, which are now considered 18 months instead of 12 months, are set according to an investor's income tax bracket.

The top capital gains tax will be 20 percent for those in the highest tax brackets, and as low as 10 percent for those in the bottom tax bracket. The long-term capital gains tax for everyone used to be 28 percent.

Meanwhile, another tax break will benefit the truly long-term investor. Assets bought after 2000 and held for more than five years will be taxed at a top rate of 18 percent.