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Bonds in an Estate

When bonds are part of the estate of the deceased, how can they be divided among the heirs?

Check with your broker first. Some bonds have provisions that allow them to be cashed in with the issuer at face value on the death of the owner. That is not necessarily the best choice especially if they are good yielding bonds.

If held in a brokerage account, splitting the bonds between the heirs is usually not difficult. Then each heir gets a subaccount, which they can cash, combine with their own account, or decide what to do in their situation.

If the estate holds the bond certificates, usually you can work with the bank that registers them to split them. But they probably will not issue bond certificates with face value less than $1000. So if the bonds are smallish and there are many heirs that can be a limitation.

Cashing the bonds before maturity is usually the worst choice. Assuming the bonds are of suitable quality, at maturity the issuer will refund full face value plus interest will be collected. A bond dealer will give you cash for them before maturity, but often less a year or more of interest. So you are best off to negotiate a fair way to divide them up with the heirs if they cannot easily be split. Similar yields, bond ratings and maturities are essentially equal, and hence easily divided. But in a typical portfolio some are more desirable than others. So sit down and make the best deal you can.

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