Ask the Expert: Redeeming inherited bonds

My parents purchased U.S. government Series EE bonds in their own names, designating each other as the sole beneficiaries. They both died without wills, and I'm their only heir. I recently found these bonds. What must I do to redeem them? 

If your parents had no wills and you're an only child, by law you inherited the bonds from your last surviving parent. To redeem them, mail the bonds, copies of both your parents' death certificates and the appropriate Treasury Department form to the Bureau of Public Debt, P.O. Box 7012, Parkersburg, W.Va. 26106-7012. The proceeds can be transferred to a bank account you designate.

The right Treasury Department form depends on whether a court administrator was appointed to settle your last surviving parent's estate. If not, you should complete Treasury Department Form PD F 5336 as the estate's voluntary representative. If the bonds are worth more than $100,000, a court-appointed administrator is required. You can ask Surrogate's Court to make you administrator, complete Form PD F 1455 to redeem the bonds, and distribute the proceeds to the heirs - in this case, to yourself. Both forms can be downloaded. Click here to find them at treasurydirect.gov.

Federal income tax will be due on all the interest earned on the bonds since they were purchased. If your last surviving parent died in 2010 or 2011, you can elect to include all interest earned up to the date of that parent's death on his or her final income tax return, and report interest earned since that date on your own tax return. Otherwise, when you redeem the bonds you must report all the income they've earned since your parents bought them on your own return.

The bottom line. You can redeem inherited EE bonds from the Treasury Department even if you aren't a named beneficiary.

Websites with more information. Click here to link to bit.ly/gZdQX8 and click here to link to bit.ly/eEV3QG, at TreasuryDirect.