In most circumstances, a savings bond cannot be sold or transferred, and only a listed owner or co-owner can redeem the bond. However, the U.S. Treasury Department does have a procedure to transfer a bond to a new owner. Only series EE bonds can be transferred. The transfer of a series I bond to a completely new owner while the existing owner lives is not allowed.
Changing Savings Bond Ownership
To change the ownership of U.S. savings bonds, the bonds must be sent to the Treasury department for reissue in the name of the new owner. The reissue of a savings bond is required to change or add co-ownership, beneficiaries or a complete ownership change. Ownership of savings bonds cannot be transferred -- such as to a godchild -- without going through the reissue process.
Filing for Reissue
The first step to having your savings bonds transferred into, say, your godchild's name is to download and complete the Treasury Form 4000. Required information can be typed into the form on your computer before printing. After printing, do not sign the Form 4000. Take it and the savings bonds to your bank to have the required signatures certified by a bank official. Mail the completed form plus the savings bonds to one of the Treasury Retail Securities sites listed at the bottom of the Form 4000 directions page.
Income Tax Consequences
If the living owner of a savings bond transfers complete ownership of the bond to another individual, the original owner is liable for taxes on the interest earned on the bond up until the time of the reissue. The Treasury will report the interest earned to the IRS and the bond owner must claim the interest on her next tax return. Paying taxes on the interest to date will reduce the amount of future taxable interest for the new bond owner. Records of interest and taxes paid should be kept with the reissued bonds to avoid paying double taxes when the bonds are redeemed.
Another way to put another individual, such as a godchild, on a bond as an owner is to add the person as a co-owner. A co-owner has full rights to redeem the bond and would become the sole owner if the original owner died. Adding a co-owner avoids the tax reporting issue. A co-owner is added to a savings bond using the Form 4000 and going through the same steps to have the bond reissued.
Tim Plaehn has been writing financial, investment and trading articles and blogs since 2007. His work has appeared online at Seeking Alpha, Marketwatch.com and various other websites. Plaehn has a bachelor's degree in mathematics from the U.S. Air Force Academy.