Savings Bonds are registered securities. They cannot be sold to anyone other than the U.S. Treasury and its agent banks. They are not marketable. Some of the consequences that follow from this status is that they can't be used a collateral for a loan and they can't be given to anyone without re-registering them. Savings bonds are also non-callable, that is, the U.S. Treasury can't force you to redeem the bonds before they stop paying interest at final maturity. Savings bonds are a completely "no-load" investment. There are never any fees for buying, selling or holding savings bonds.
You can buy actual paper bonds (referred to as "definitive bonds") at banks, or you can buy book entry bonds at TreasuryDirect (referred to as "electronic bonds"). Bonds always earn interest from the first day of the month in which they are issued. There is a maximum purchase limit: $30,000 per series, per type, per social security number, per year.
Each bond must have a registered owner. The bond can include one other name, either a co-owner or a beneficiary. When a bond has a co-owner, the Treasury and the IRS assume that the first named owner is the principal owner, who is the person who will pay the income tax on the interest that the bond has earned. Of course, documentation such as a contract between the parties can show otherwise.
Co-owned or joint paper bonds can be cashed in by either the principal owner or the co-owner. The removal of a co-owner requires both signatures. Co-owned electronic bonds can only be cashed in by the principal owner, and the principal owner can change or remove a co-owner without the co-owner's knowledge or permission.
When a bond is cashed, it is generally accepted that the individual cashing the savings bond is the individual responsible for the interest reporting on that year's income tax return for the interest accrued by the bonds. A 1099-INT is issued by the financial institution for those bonds to that individual who presented the bonds for payment. It may be that this is incorrect income tax reporting. In which case the individual receiving the1099 must report the interest but make an adjustment on his or her 1040 by subtracting the amount reportable by another taxpayer as a nominee distribution, then give the actual owner a Form 1099-INT and file Form 1096 with the IRS.
Some reissue transactions are taxable events and require that the interest earned on the bonds be reported as income for the year in which the reissue occurs.
Consent is not required for the owner to change a beneficiary (except in cases of some older Series E Bonds). Beneficiaries cannot cash in bonds until the owner's death.
If a bond has a co-owner or beneficiary and the co-owner or beneficiary survive the principal owner, then on the principal owner's death, the surviving joint owner or the beneficiary becomes the owner. The bonds may be reissued in the name of the owner or beneficiary. The principal owner's will does not govern who is the recipient of a bond with a second name.
This is an important point. If you have taken care to craft a will with percentage or specific distributions to beneficiaries, putting beneficiaries or co-owners on bonds (or any asset, for that matter) can wreck your carefully laid plan.
Many customer service representatives and other financial institution employees may urge you to add co-owners or beneficiaries, not only to your savings bonds, but to bank accounts, securities and other investments. Often they will tell you that adding a name will avoid probate. That is true, as far as it goes; but if you have an estate plan in place, it is usually best not to add co-owners and beneficiaries because it will defeat a carefully thought out estate plan. Before adding a co-owner or beneficiary check with your estate planning attorney.
The U.S. Treasury has a website that provides information about all kinds of savings bonds: click here. There you can find a calculator which will give you redemption value, current interest rate, next accrual date, final maturity date and so on. You can enter your list of bonds and it will stay there. You can look at the values on later dates.
For further information I also recommend Tom Adams' book, Savings Bond Advisor, Alert Media 2007.