While bearer bonds aren’t issued in the U.S. any more, a few are still in circulation. If you can find them you can still collect the value, and in some cases interest. Besides buying or inheriting bearer bonds, you can get them in the foreign countries that still allow them to be issued. However, they can be risky to own and can raise suspicions as they can be used for tax evasion or criminal activity.
Some bearer bonds were sold by the U.S. Department of the Treasury while others were issued by banks and financial institutions. Congress prohibited the issuance of new bearer bonds in 1982. Unlike other types of bonds, where ownership is registered, bearer bonds as originally issued could be redeemed by anyone possessing them. Electronic banking changed how bonds were issued and accounted for, according to the New York Times. Because of their anonymity, bearer bonds were often used for tax evasion purposes.
Available Bearer Bonds
According to the U.S. Treasury there were still $95 million in non-redeemed U.S. Treasury bonds at the time of publication. Redeeming old bearer bonds can be difficult as many original issuers have gone out of business or merged with other financial institutions. Bearer bonds might be found as part of a retiree;s investment portfolio and can be passed down to relatives.
Finding Bearer Bonds
Buying bearer bonds issued in the U.S. means finding a private seller. An investment broker is usually the best source for finding them and they're still honored by some banks. A few European countries still allow bearer bonds to be sold, including Luxembourg, and they can also be found in some Central American and South American nations. Exercise due diligence in researching the issuer as fraud is not unheard of.
Redeeming Bearer Bonds
Most bearer bonds have a face value of $5,000. Once a bearer bond is called, its face value is still redeemable but any interest payment coupons that haven’t been redeemed are invalidated. Holders of bearer bonds can collect interest on the bond by clipping and exchanging a series of coupons attached to the document. The issuing institution can call the bonds once they mature and notices are usually posted in financial publications.
Bearer Bond Risks
Owning bearer bonds can carry risks because of their similarities to cash. If lost, stolen or damaged, there is no way to replace them. Most of the anonymity that bearer bonds once offered is now gone. Even though the holder can still redeem the bond, they must register their Social Security number and pay taxes when doing so.
- New York Times: Coupon Clipping, the Old-Fashioned Way
- Live Financially: How to Get Bearer Bonds
- Treasury Direct: Bearer and Registered Securities Balances as of September 30, 2013
- Milbank Tax Group Client Alert: New IRS Guidance - "Bearer" Bonds May Now Be "Registered"
- Bearer Bond: How to Buy Bearer Bonds
- Bearer Bond: Negotiable Bearer Bonds and Redemption
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