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LEGAL DICTIONARY

Bearer

The term bearer simply refers to a person who holds or carries a thing. However, in a legal context, it almost always signifies someone who possesses a negotiable instrument.

Understanding the responsibilities of being the bearer of a financial legal document is absolutely crucial if you are the holder in question. Read on below to learn more about when this might apply and what specific instruments can grant you this authority.

If you are the bearer of a document this means that you are the owner of the debt or payment due. This is not the same as being a party in a financial contract such as a loan agreement, as in this case you and other named parties are bound by the agreement.

In the case of being a bearer, doesn’t matter if you are the original creditor of the amount owed or someone else who has received ownership of it during its lifespan. The bearer is always considered to be the person in possession of the negotiable instrument in question at the current moment.

For example, money operates on this principle. In this case, the bearer is the person holding the notes or coins and they may transfer ownership of its value by exchanging it with someone else.

What Are Bearer Instruments?

Bearer instruments comprise any certificate or legal note that allows the holder to collect or receive the value stated on the document.

The most common types of bearer instruments include:

How to Transfer Bearer Instruments

It is relatively straightforward to trade a bearer instrument with another party. The exchange of these holdings doesn’t need to be officially registered nor reported. You will only need to declare ownership for tax or accounting purposes if you are currently the bearer.

The certificate or legal document for the debt just needs to be given to the person that it is being sold or transferred to. The new holder may then exchange it for the value stated on the form if they choose or sell it to someone else.

For example, in the case of bonds, the original holding certificate may be exchanged up to the point that it matures. When this happens the current holder is able to then cash in the bond for the value of the original investment plus any interest gained during this time.