Is there a step-up in cost basis for government bonds held in a Trust when a spouse dies?

Forum|Forum|1 year ago
April 6, 2025
2 replies
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I’m retired and have some paper EE and I savings bonds I want to sell. The bonds are held in my husband's and my Trust, have not matured yet, and my spouse died on 1/9/25. One financial advisor said I should get a step-up in cost basis based on the date my husband died, and that step-up would reduce my taxes. Another financial advisor said there wouldn’t be a step-up in cost basis. Which advisor is correct?

If there is a step-up in cost basis, how would I determine what it is? Would I use the TreasuryDirect Savings Bond Calculator site to calculate the value of the bonds on the day my husband died to determine what the step-up in cost basis would be? If so, where would I enter that info in TurboTax desktop when I do my taxes next spring?

MAK70

If it was a joint account, you would get a partial step-up in basis. The step up in basis would be for one-half of the original basis. (See Joint interest.) Next year when you file your taxes, you would be able to do an adjustment for the basis. (You would look up the TreasuryDirect calculator and add one half of the value on date of death to your basis.) Sorry for your loss.

kritter-kAuthor

Thank you. My husband and I were living in AZ (a community property state) when he died, but I have since moved to CO (which is not a community property state). Does that have any bearing on whether I get a partial or a full step-up in cost basis? I know for selling a house in AZ after the death of a spouse, I’ll get a full step-up; so would I also get a full step-up for the bonds?

dmertz

Employee

Savings bonds do not get a step-up in basis.

kritter-kAuthor

Based on the first answer to my question, I would get a step-up in basis. So once again, I am getting contradictory answers, just as I did from two financial advisors. Can you point me to an IRS web page that might settle this?