What Should Louisiana Residents Do With Their Series EE or Series I Savings Bonds When Planning Their Estate?

I was working with a couple yesterday in our Baton Rouge office. Their neighbor had used our services and were satisfied, so they wanted to get the same peace of mind knowing that all of their legal affairs were in order. They discussed with me what they owned: home, IRAs, bank accounts, vehicles...the usual stuff.

I asked them if they were worried about the prospect of losing everything if they had a nursing home situation. She shook her head up and down and stated that it was one of her biggest concerns. They had an estate the size of which they needed to protect because it was more than what they are allowed to have and qualify for Louisiana Long Term Care Medicaid, but it was not so much that if they spent just a few short years in a nursing home, it would all get eaten up by nursing home costs.

So we started a discussion about how simple it would be to protect the value of their home from Medicaid's Estate Recovery lien, which if the home was not protected, would allow Medicaid to force a sale of the home after they both died to reimburse Medicaid for what it had spent on their nursing home expenses. We also discussed how easy it would be to protect their bank savings, particularly because they were starting the planning process while they were still healthy.

The wife went on to tell me that she had purchased a long term care insurance policy years earlier, but the insurance company would not permit the husband to buy a policy because of some health concerns.

We kept talking about some of the issues involved in protecting their IRAs from nursing home expenses. We discussed the Community Spouse Resource Allowance which allows married couples to protect more than $100,000 of the IRA and other assets if only one spouse enters a nursing home while the other stays at home.

We all felt that we had come up with a good strategy to protect what they had worked for from nursing home expenses, and also from probate, and as I was summarizing all of the details of their program, she said, "Oh, I almost forgot...I have all of these Savings Bonds. What do I do with these?"

She pulled an envelope out from which came a two-inch thick stack of United States Savings Bonds. I shuffled through them and discovered that some were in the wife's name only, some were in the husband's name only. Some were titled, "Wife OR Husband." And some were titled, "Wife OR Child."

She said, "What can we do to protect these Savings Bonds?"

I told her, "It's simple." Once your trust is signed - next time you come back to the office - you will be able to re-title all of your Savings Bonds into your trust by going to a special website. Transferring your savings bonds to your trust will prevent you from being forced to sell them and spend them if you go into a nursing home, AND, your son that you designated to handle your family's affairs when you and your husband die (the son's title is called the "Successor Trustee") will not have to fight with lawyers and the court system to get those bonds sold or transferred to your children equally when you die.

We pointed out to her that she will need to complete a Request to Reissue United States Savings Bonds to a Personal Trust, and that form is available online at http://www.treasurydirect.gov/forms/sav1851.pdf.

We told her that any questions regarding proper completion of this form could be directed to the Treasury at 1-800-245-2804.

We discussed how when the government re-issues a Series EE or Series I savings bond, it no longer issues a paper bond, and that the reissued bond is in electronic form - this actually makes things simple - don't have to deal with all that paper anymore.

We discussed how since she was transferring the bonds to their "Grantor Trust," the tax on the deferred interest would not have to be paid. The interest from the bonds would continue to accumulate tax deferred until the bonds were disposed of or they finally matured.

While some Louisiana residents have complex assets that are difficult to deal with when it comes to probate, Medicaid, usufruct, donations, gifting, Successions, taxes,  or re-titling, the government has actually done a pretty good job making it easy to re-issue United States Savings Bonds to a trust, allowing your clients to avoid all of the itemization of the bonds when they go through probate, and, if desired, allowing your clients to avoid being forced to sell and consume bonds if there is a nursing home situation.

If you own United States savings bonds and you want to simplify what your family will have to go through one day to get those bonds and other estate assets settled, whether it's when you die, when you become incapable, or perhaps even when you enter a nursing home, then give us a call at Rabalais Estate Planning, LLC, and we'll discuss, perhaps, a program to simplify all of this and leave your family a legacy instead of a headache.