I held two CDs with my grandmother jointly (with "or" between our names). She was the primary account holder and received the 1099 tax forms. She passed away last October, but the CDs don't mature until May and August. I understand that if I close them early I'll pay a big penalty. I'll reimburse my uncle (the executor) for taxes on last year's interest, but is there any way I can be named on the current year's 1099s and receive them directly so my uncle doesn't have to be bothered with it again next year? He's asked me to take care of this.
Let's start with the early withdrawal penalties. You may have already checked with the bank, but just in case you haven't, you should know that a lot of bank waive these penalties if an CD owner has died. There is no federal rule that requires them to do so, however, so ask just to be sure.
As for the 1099 issue -- if you give the bank a copy of your grandmother's death certificate, your social security number and documentation of your identity, the bank will change its records to show that you are the sole owner of the account. That should also ensure that the 2007 IRS reports on form 1099-INT reflect your name and social security number. You and your uncle seem to have settled on how to handle the 2006 interest. That may be the simplest solution, but if either of you uses a tax professional, see if there's a better way to allocate the reported interest between your grandmothers final tax return and yours, of course, if your uncle has already filed your grandmother's 2006 return, it may be better to leave things as you've agreed.
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Let's start with the early withdrawal penalties. You may have already checked with the bank, but just in case you haven't, you should know that a lot of bank waive these penalties if an CD owner has died. There is no federal rule that requires them to do so, however, so ask just to be sure.