How to Avoid Taxes
There are two likely scenarios in the event of the death of a bond holder, according to Stephen Meyerhardt, speaking for the Bureau of the Public Debt.So, if you work for a living, tough noogies. After all, someone has to pay that interest!
If there's a co-owner or a beneficiary named on the bond, the bond would become the property of that person.
If there's no co-owner or beneficiary or if they died before the primary owner, the bond becomes part of the primary owner's estate and goes to the heirs.
Federal tax on the interest accumulated on the bond is owed by whoever redeems the bond unless the estate handles the tax or the original bond holder had paid tax on it year-to-year.
The good news on taxes is that if the person who redeems the bond uses it to pay qualified education expenses, it can be claimed as an exclusion from income on their tax filing.
And NO state tax is owed on I-bonds. [emphasis added]
But, if you sit back and collect interest, American tax payers will subsidize education in business and finance for you and your heirs so you can better learn how to fleece us.