- Purchase the savings bond you choose (Series EE or Series I) in the denomination you want ($25 to $10,000).
Is it still possible to purchase a savings bond at a bank?
Although the current 2.2 percent interest rate on Series I savings bonds is appealing, purchasing the bonds has grown more difficult. Paper Series I and EE savings bonds—those handy envelope stuffer gifts—can no longer be purchased in banks or credit unions; instead, you must purchase electronic bonds through TreasuryDirect, the Treasury Department’s Web-based system. Our correspondent discovered the procedure of purchasing a savings bond for her little nephew to be cumbersome. Here’s some assistance:
Can I purchase bonds for my grandson?
TreasuryDirect accounts are only available to those aged 18 and up. Guardians can link minor grandchildren’s accounts to their own so that grandparents can send savings bonds to their grandkids electronically.
If you don’t know your grandchild’s Social Security number, you can buy a paper savings bond with your own.
Print a gift certificate from the US Department of the Treasury website to announce your gift of a paper savings bond.
Can grandparents purchase savings bonds on behalf of their grandchildren?
Savings bonds are acquired on the TreasuryDirect.gov website through an account. Grandparents must open an account before purchasing bonds for minor grandchildren, and the gift bonds can then be moved to accounts in the grandchildren’s names, or linked to accounts in the names or names of the grandchildren’s parents.
What is the cost of a $100 savings bond?
The federal government issues savings bonds, which are backed by the “full faith and credit” guarantee. Savings bonds, unlike Treasury bonds, can be acquired for as little as $25. Savings bond interest is taxed at the federal level, just like Treasury bonds, but not at the state or municipal level.
Savings bonds are available from the US Treasury, banks, and credit unions, and are frequently offered by employers through payroll deduction. Savings bonds, unlike most other Treasury securities, cannot be bought or sold on the secondary market. In fact, a savings bond can only be paid to the person or persons who have registered it.
Paper savings bonds are no longer marketed in financial institutions as of January 1, 2012. Electronic savings bonds in Series EE and I will continue to be available for purchase through TreasuryDirect, Public Debt’s secure, Web-based system.
See TreasuryDirect’s page on Death of a Savings Bond Owner for details on how to handle savings bonds left in the wake of a death.
I Bonds and Series EE Savings Bonds are the two most frequent varieties of savings bonds. Both are accrual instruments, which means the interest you earn is compounded semiannually and accrues monthly at a variable rate. When you redeem the bonds, you will receive your interest income.
The I Bond tracks inflation to ensure that your earnings are not reduced by growing living costs. After May 2005, Series EE Savings Bonds have a fixed rate of interest. All state and local income taxes are waived for both types of bonds.
The TreasuryDirect website allows you to buy savings bonds electronically. There will be no physical certificate. TreasuryDirect is a secure online account that allows you to buy, track, alter registration, and redeem your bond. TreasuryDirect account holders can convert their paper savings bonds to electronic securities in a special Conversion Linked Account in their online account using a program called SmartExchangeSM.
Most savings bonds are offered at face value, whether purchased electronically or in physical form. This means that a $100 bond will cost you $100 and will earn you interest.
Always verify the issue date of a savings bond to see if it is still collecting interest. It might be time to redeem your securities, depending on when you bought them.
How do I go about purchasing bonds for my child?
TreasuryDirect.gov makes it simple to purchase savings bonds online. They can be engraved with your name or the name of the child for whom they are being purchased. Prepare to submit the child’s entire name and Social Security number if the savings bond is to be given as a gift. The recipient must also have a TreasuryDirect account of their own. If you don’t have one, you can keep the gift in your account until you can set one up for them. Gift bonds are available in denominations ranging from $25 to $10,000.
Can grandparents put money into a 529 account for their grandchildren using Series EE bonds?
A grandparent can normally claim the interest exclusion only if the grandchild is claimed on the grandparent’s tax return.
Only the taxpayer, the taxpayer’s spouse, and the taxpayer’s dependents are eligible for tax-free redemptions.
You can’t move the bond owner to the grandchild’s parents since the savings bond’s interest would be subject to income taxes. Gift taxes may apply if the bond’s owner is changed.
When the grandchild is not the grandparent’s dependent, there is a multi-step solution.
- On the 529 college savings plan, the grandparent should name himself or herself as a beneficiary.
- The account owner of the 529 college savings plan does not have to be the grandparent.
- Within 60 days, the grandmother redeems the savings bonds and deposits the proceeds into a 529 college savings plan.
- The grandparent’s 529 plan beneficiary has been transferred to the grandchild’s 529 plan beneficiary.
Because none of the three conditions of the step transaction doctrine are met, this process does not violate the step transaction doctrine. There is no obligation to complete all of the steps. The steps are not interconnected in any way. Each step’s objective could serve a separate function. For example, the grandparent could utilize the 529 plan funds to pay for his or her own continuing education courses.
Who owns the funds?
First, you must decide whether to keep the cash in your name or in the name of your grandchild.
Your savings could jeopardize your grandchild’s financial aid application. This is especially true if the funds are held in the name of your grandchild.
The Free Application for Federal Student Aid (FAFSA) uses a formula to determine how much financial aid a student should receive.
When calculating a student’s ability to pay for college, this system strongly penalizes them for money stored in their name.
Access to the funds
Next, if you put the money in your grandchild’s name, they may be able to access it before you wish them to.
They may also use the money in ways other than those for which you intended.
A child can normally access any funds in their name until they become 18, or 21, depending on the state. That also implies they’re free to do anything they want with them.
If you keep the money in your name and simply identify your grandchild as a beneficiary, you may maintain control over how it is spent.
You won’t have to deal with an 18-year-old wasting thousands of dollars customizing an old car this way.
What is the procedure for purchasing a savings bond as a gift?
- Purchase a savings bond in the denomination of your choice ($25 to $10,000).
- Deliver the gift to the recipient’s TreasuryDirect account after the necessary five-business-day holding period has expired. You’ll need the recipient’s account number and legal name, as well as their Social Security number, to accomplish this. A parent or guardian can create a minor linked account for a child under the age of 18.
Is it possible for grandparents to gift money to their grandchildren tax-free?
Giving assets to your grandchildren can do more than help them get a good start in life; it can also help you minimize the amount of your estate and the tax you’ll owe when you die.
Giving the grandchild an outright gift is perhaps the easiest method of presenting. Without having to record the gifts, you can give each grandchild up to $16,000 each year (in 2022). If you’re married, you and your partner can each give such a present. A married couple with four grandkids, for example, can give away up to $128,000 per year without incurring gift tax. Furthermore, the gifts will not be taxed as income to your grandkids (although the earnings on the gifts if they are invested will be taxed). Just keep in mind that any donation could jeopardize your Medicaid eligibility.
Is it possible to give money to my grandchildren tax-free?
It’s a good idea to speak with an experienced Massachusetts estate planning attorney if you’re thinking about giving money to your grandchild. Here are several possibilities:
Give cash
Of course, this is the most straightforward method. In 2021, you can give each grandchild up to $15,000 per year without having to declare the gifts or facing any federal tax implications. This is true for both partners in a married partnership. They can also gift that sum to as many grandchildren as they wish. So, if Stan and Mary had three grandchildren, they could present $90,000 to them in 2021 and avoid paying gift taxes on it. To their grandkids, the gifts will not be considered taxable income.
Giving a financial present has the disadvantage of not being used in the way you intended. Perhaps you expected the money to be spent towards the child’s future education, but instead they chose to spend it on a vacation or a car.
plans
You might invest the funds in a 529 college savings plan, which covers the expense of higher education. Contributions to 529 plans are tax-deductible. They’re in mutual funds, which means they have the potential to develop. As part of a state-sponsored investment plan, the state works with an asset management firm to manage the investment according to the plan’s specifications.
Individual contributions to Massachusetts 529 plans of up to $1,000 per year and up to $2,000 per year for married couples filing jointly are tax deductible in Massachusetts.
Custodial accounts
Minors’ assets are held and protected in custodial accounts until they attain the age of majority, which in Massachusetts is 21. The account’s originator (typically a parent or grandparent) names a custodian to manage the account for the underage child. The custodian can take money out to meet the child’s legitimate needs. These accounts usually allow you to invest in stocks, bonds, and mutual funds. Custodial accounts such as the UGMA (Uniform Gift to Minors Act) and UTMA (Uniform Transfer to Minors Act) are popular options for college savings.
Savings bonds
The Treasury Department of the United States issues these to fund government activities. The money you put into a savings bond is a loan to the United States government. Interest can be earned on the savings bond for up to 30 years. The savings bond can be redeemed for its face value plus any interest collected after 12 months. If you redeem the bond before it reaches the age of five years, you’ll lose the last three months’ interest.
Wills and trusts
Money can also be left in a will or a trust. One of the biggest benefits of using a Massachusetts trust is that it may simply be customized to meet your specific needs. For example, you could opt to give the recipient a certain percentage of the assets at specific ages. One option is to give them 25% of the assets when they reach the ages of 21, 25, 30, and 35.