Savings bonds are popular gifts for young children, and grandparents often regard them as a good opportunity to invest in their grandchildren’s future. However, in some situations, parents will want to spend the earnings from savings bonds while their child is still a minor. In that instance, the parent must cash in the bond through US Treasury processes.
The Treasury distinguishes between paper savings bonds and electronic savings bonds. The Treasury permits parents to redeem their children’s paper bonds provided two conditions are met. To begin, the youngster must be too young to sign the payment request. Second, the child must either live with the parent or have legal possession of the child.
The Treasury recommends that you put particular language on the back of the bond and sign it as a parent on behalf of the child to redeem it. The following is the language used:
“I confirm that I am the parent of.resides with me / I have been given legal custody of.is years old and is incapable of making this request.”
If the parent takes the bond to a local financial institution ready to redeem it for him or her, the institution can pay the parent directly. If the bond is not redeemable at the local financial institution, the parent must have the signature guaranteed or attested before sending the bond to the Treasury Retail Securities Site. The Treasury website has more information.
Paper bonds
Your bank or credit union should be able to cash in your paper savings bonds. If you’re going to a financial institution where you’re not a member or customer, check to see if they’ll cash your bond before you go.
Confirm what documents you’ll need to bring with you by contacting the bank. Here’s what you should bring with you in general.
It’s important to remember that bonds can’t be cashed by just anyone. Savings bonds can only be cashed by the bond owner or co-owner, which includes “survivors,” or those identified on the bond who received ownership after the original owner died. You are not the registered owner (a savings bond is nontransferable) and cannot cash in the bond if you purchased it through an auction site like eBay.
If the child is too young to sign the payment request and the child lives with the parent or the parent has legal custody of the child the parent may cash in the child’s savings bond.
Anyone else who wants to cash in a bond must show proof of legal authority to do so.
You’ll sign each bond and receive the cash value at the bank. The bank will either hand you a 1099 tax form or mail it to you before the end of the tax year after you’ve cashed in your bond.
Paper bonds can also be redeemed through the mail. To cash in by mail, obtain an FS Form 1522 from the US Department of Treasury, have your signature certified, then mail the form to the address shown on the form.
Electronic bonds
By connecting into your TreasuryDirect account and setting up a direct payment to your bank or savings account, you can cash in your electronic bonds. The cash amount may be credited to your bank account within two business days.
When may a youngster cash in their savings bonds?
While anyone can buy a savings bond, because they have a 30-year maturity period, many individuals give them as gifts to children. You or your child can cash in a savings bond once it has been on the market for 12 months.
How can I cash a savings bond that belongs to someone else?
Giving someone power of attorney over your savings bonds allows you to approve them to be cashed. To certify her signature, the attorney-in-fact must produce the bond or bonds to an authorized officer of a trust company, credit union, or bank.
What do you do with savings bonds for children?
You’ll need to figure out how much the bond is worth first. This savings bond calculator can be used to calculate paper bonds that can be redeemed at most financial institutions. Just make sure you have identification with you. You can check the value of electronic savings bonds in your TreasuryDirect account and redeem them (if you’re ready). Within a few business days of redemption, the cash value will be paid into your bank or savings account.
If you’re redeeming a savings bond for a child, you’ll need to take some extra measures. If the bond is a paper bond, both the parent’s and the child’s names must be written on the back of the bond. They’ll also have to prove that they are the child’s legal guardian in writing. (Guardians are required by the Treasury to use certain phrasing.)
Alternatively, they can fill out this form and send it straight to the Treasury, which may require a certified signature. When it comes to electronic savings bonds, parents can set up a TreasuryDirect account for their child and link it to their own, then redeem the bonds as needed.
What is the procedure for cashing a savings bond that is not in my name?
If you are not identified as the owner or co-owner on the bond, you must produce legal evidence or other documentation to establish you are entitled to cash the bond, regardless of where you cash it. (Legal evidence is not returned.)
It is important to note that savings bonds cannot be transferred. You can’t cash a bond that belongs to someone else or that you bought on an internet auction site. (See Death of a Savings Bond Owner if you inherit a bond through the death of the bond owner.)
To cash a savings bond, what documentation do I need?
If you want to redeem a paper E/EE or I bond, you’ll need a few items. You’ll also need confirmation of identity, such as a driver’s license from the United States. You’ll also need an FS Form 1522 that hasn’t been signed. They’ll see you sign the document and then certify your signature if you go to your local bank or credit union.
The unsigned bonds, along with the signed FS Form 1522 and, if you’re the bond’s beneficiary, accompanying legal evidence or other papers to indicate you’re entitled to cash the bond, should be sent to the US Department of Treasury at:
The same steps apply for series H or HH paper bonds, only you’ll ship the unsigned bonds to the US Treasury at:
When you cash in your savings bonds, do you have to pay taxes?
State and local taxes are not levied on savings bonds. You don’t get your interest until you redeem your bonds, so you can defer paying taxes until then, however you can choose to pay taxes on the interest you’ve earned every year. Bond interest is taxed at your marginal tax rate by the government. You must pay a 3.8 percent Medicare tax based on your investment income or the amount of adjusted gross income that exceeds the mentioned levels if you earn more than $200,000 as an individual or $250,000 as a couple. For the purposes of calculating your Medicare tax, savings bond interest is included in your investment income. You cannot redeem savings bonds during the first year of ownership, and if you do so within the first five years, you will be charged three months’ interest.
Are bonds available to minors?
Adults can purchase savings bonds for children under the age of 18 and register them in the name of a kid or children using the registration process outlined above.
- Electronic bonds are bonds that are created electronically. You can set up an account for the child that is linked to your TreasuryDirect account if you are the parent or other adult responsible for the minor’s support. Your account is the sole way to get to the minor’s account. Securities that have been registered in the minor’s name can be purchased or transferred to his or her account. Learn More About Accounts That Are Connected
- Bonds made of paper.
- You can buy a paper Series I bond for a youngster using money from your federal tax return as an adult through the tax-time bond program.
- You must provide your Social Security Number if you do not know the minor’s.
- However, if you provide a bond to a minor and the bond does not display your name, you will not be liable for income taxes.
What is the value of a $100 US savings bond?
You will be required to pay half of the bond’s face value. For example, a $100 bond will cost you $50. Once you have the bond, you may decide how long you want to keep it foranywhere from one to thirty years. You’ll have to wait until the bond matures to earn the full return of twice your initial investment (plus interest). While you can cash in a bond earlier, your return will be determined by the bond’s maturation schedule, which will increase over time.
The Treasury guarantees that Series EE savings bonds will achieve face value in 20 years, but Series I savings bonds have no such guarantee. Keep in mind that both attain their full potential value after 30 years.
Is it possible to cash in my parents’ savings bonds?
If you are now the owner of the savings bonds or if your parent listed you as the survivor beneficiary on the bonds, take them to a bank or other financial institution. In the presence of a bank official, fill out the redemption form on the back of the bonds and sign it. A driver’s license or other form of identification is required. You must also provide proof of death if you are mentioned as a survivor. This is usually done by a verified copy of the death certificate. The bank will redeem the bonds and pay you the proceeds.