Bearer Instrument Law and Legal Definition

A bearer instrument refers to an instrument that is payable to anyone possessing the instrument and is negotiable by transfer alone. For example, shares and bonds are bearer instruments. Bearer instruments are distinct from normal registered instruments, because with respect to a bearer instrument no records are kept of about the one who owns the instrument. Whoever physically holds the bearer bond papers owns the property. Bearer instruments can be employed in certain jurisdictions to avoid transfer taxes, in spite of the fact that taxes may be charged when bearer instruments are issued. “When an instrument is payable both to bearer and order, the instrument states contradictory terms, but it is nonetheless a bearer instrument.”[ State v. Herrera, 130 N.M. 85 (N.M. Ct. App. 2000)].