The Federal Government framed the treasury regulations for administrative convenience. However, the regulations regarding the status of the ownership of government securities and bonds have created some confusion in the context of community ownership. Hence, courts have held that treasury regulations should not come in the way of a community member claiming ownership of government bonds. Thus, if a spouse purchased government bonds during the period of coverture of the spouses; such bonds are presumed to be community property. However, the burden of proof is upon the spouse claiming them to be his/her separate property, and such spouse shall adduce sufficient evidence to rebut this presumption. The party must prove that the separate funds were used for the specific purpose of purchasing the bonds[i].
Similarly, spouses can purchase federal savings bonds by contract. The contract vests a right to property and a spouse, on the death of her partner, will be entitled to the sole ownership of government bonds purchased with community funds and which named both spouses as owners[ii]. Further, a state law which prohibits a married couple from taking advantage of the survivorship provisions of United States Savings Bonds by requiring the survivor to reimburse the estate of the deceased co-owner, merely because the purchase price is paid out of community property is illegal. Courts have held that such a state law violates the Federal Constitution’s Supremacy Clause[iii].
[i] In re Estate of Allen, 54 Wn.2d 616 (Wash. 1959)
[ii] Smith v. Ricks, 159 Tex. 280 (Tex. 1958)
[iii] Free v. Bland, 369 U.S. 663, 670 (U.S. 1962)