17 Jul I’m an executor. What do I do with these paper bonds?

Q. I am the executor of my uncle’s estate. He passed away in the beginning of 2024. I recently found paper government bonds in his residence. They were all titled to him and his deceased wife. Some have reached maturity date while others are still accruing interest. I am his sole beneficiary. How do I handle these bonds and where do I report the income?
— Needing help

A. We’re sorry to hear about your uncle.

Being his executor is an important job, and you want to make sure you do everything right.

You should open an estate checking account for the estate, said Bernie Kiely, a certified financial planner and certified public accountant with Kiely Capital Management in Morristown.

Next, he said you should go to your bank with the bonds.

“You will have to present to the banker ‘letters testamentary,’”  he said. “This is a document that you received from the probate judge that proclaims to the world that you have the legal authority to settle your uncle’s estate.”

The banker will cash the bonds and deposit the funds into the estate checking account, Kiely said.

The government will issue a 1099 form to the estate showing the interest paid from the savings bonds. You must report this income of the estate’s Form 1041, he said.

“As the executor and sole beneficiary, you have the option of having the estate pay the tax or the estate can pass the income and the tax liability to you,” Kiely said. “The estate would issue you a federal form K-1. You would then include the income and resulting tax on your Form 1040.”

Kiely said it may be worth consulting with a tax preparer who has experience with estate income tax preparation. They can guide you as to which way would be best.

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This story was originally published in July 2024.

NJMoneyHelp.com presents certain general financial planning principles and advice, but should never be viewed as a substitute for obtaining advice from a personal professional advisor who understands your unique individual circumstances.