Join Early Retirement Today
Reply
 
Thread Tools Search this Thread Display Modes
Old 10-21-2009, 12:08 AM   #21
Moderator Emeritus
Martha's Avatar
 
Join Date: Feb 2004
Location: minnesota
Posts: 13,212
Quote:
Originally Posted by Martha View Post
I think that you will end up paying the taxes on the accrued interest, even if you gift the bond rather than cash it in. IIRC, when you gift a bond it is reissued in the new owner's name and interest accrued to date is taxable to the old owner. But you are going to have to poke around to see if I am right, I can't find a link on a very quick google. You might find the answer in IRS pub 550 Publication 550 (2008), Investment Income and Expenses


I think it is cool that you want to help pay for your niece's education.
It does look like ee bonds and I bonds are non-transferable and thus tax will be due when you cash it in or have one re-issued in your niece's name.
Individual - EE/E Savings Bonds FAQs

(see my signature)
__________________

__________________
.


No more lawyer stuff, no more political stuff, so no more CYA

Martha is offline   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Old 10-21-2009, 12:52 AM   #22
Thinks s/he gets paid by the post
kyounge1956's Avatar
 
Join Date: Sep 2008
Posts: 2,171
Quote:
Originally Posted by Martha View Post
I think that you will end up paying the taxes on the accrued interest, even if you gift the bond rather than cash it in. IIRC, when you gift a bond it is reissued in the new owner's name and interest accrued to date is taxable to the old owner. (snip)
I checked that link, and that's what it looks like to me too.

Quote:
Originally Posted by Martha View Post
Man, you folks are tough on the OP's niece.
Ain't that the truth! I have two nieces who have graduated and another one besides this one in college, and this is the first time any of them have asked me to help with college expenses, so the rest of youse can stop making those remarks that sound as if you think niece is a leech and her parents are deadbeats. Neither the nieces nor their parents make a habit of asking for handouts. This particular niece's mom is a nurse and has always been a go-getter and worked lots of OT. In fact, she works a lot harder than I ever have! My mom told me how much my sister has made some years and quite knocked me for a loop. I had no idea nursing was so lucrative! If I were making that kind of money, I might also have OK'd a daughter's wish to go to an expensive school. As has happened not infrequently, the original plan has been derailed by my sister's medical problem. Nothing life-threatening, but this has definitely put a crimp in her earning power.

Quote:
Kyounge, I assume that you are not giving more than $12,000 a year (or $24,000 if you are married). If you are giving more than that you might have to do a gift tax return for the excess. There is an exemption for direct payments for tuition expenses. This exemption is allowed without regard to the relationship—so the recipient need not be a close relative or your dependent. The payments must be made directly to the educational institution. Room and board, supplies, books and other fees do not qualify.

Probably not relevant in your case but I thought that I would throw it out there.

(see my signature)
You assume correctly. It isn't $12K a year or anywhere close. Knock off one of those zeros and change "per year" into "one-time" and you will be in the right ballpark. I will look up on irs.gov about direct payment of tuition...that might be the way to go.

I was talking with my mom about this last night. It is amazing how much more expensive college is now than back in the 1970's when I was going. I graduated with a six-hundred dollar student loan outstanding, and that was only because I did an exchange year in England. I paid it off with my first job before the interest even started to accrue. My older brother, my sister (niece's mom) and I were all in college at the same time. Granted we were all going to schools in our home state, but nowadays I can't imagine people who are in the same income range as my parents (clergyman & junior high teacher) having three kids in college simultaneously, even state schools, without major borrowing.
__________________

__________________
kyounge1956 is offline   Reply With Quote
Old 10-21-2009, 01:01 AM   #23
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
haha's Avatar
 
Join Date: Apr 2003
Location: Hooverville
Posts: 22,387
Quote:
Originally Posted by kyounge1956 View Post
. My older brother, my sister (niece's mom) and I were all in college at the same time. Granted we were all going to schools in our home state, but nowadays I can't imagine people who are in the same income range as my parents (clergyman & junior high teacher) having three kids in college simultaneously, even state schools, without major borrowing.
I think what you say is usually true, but my sons put themselves through State U with very minor borrowing. They did have highly remunerative job skills, and they prolonged their college years by working as they went. I didn't feel that I had enough money to help them, and I also could see that though it would have been easier for them without so much work they were doing fine and they came out not wondering what to do next as they had already been doing it very successfully. My wife was in graduate school at the same time; I did largely pay for that though when we divorced she took her student loan with her and I took the credit card debt she had accumulated.

Ha
__________________
"As a general rule, the more dangerous or inappropriate a conversation, the more interesting it is."-Scott Adams
haha is offline   Reply With Quote
Old 10-21-2009, 10:14 AM   #24
Moderator Emeritus
Bestwifeever's Avatar
 
Join Date: Sep 2007
Posts: 16,375
Kyounge, I think it's great that you're helping your niece. Remember no post here is not subject to our favorite hobby of giving unsolicited advice (I'm really good at that). Would you like me to tell you what she should major in?
__________________
“Would you like an adventure now, or would you like to have your tea first?” J.M. Barrie, Peter Pan
Bestwifeever is offline   Reply With Quote
Old 10-21-2009, 10:28 AM   #25
Moderator Emeritus
Martha's Avatar
 
Join Date: Feb 2004
Location: minnesota
Posts: 13,212
Quote:
Originally Posted by kyounge1956 View Post


You assume correctly. It isn't $12K a year or anywhere close. Knock off one of those zeros and change "per year" into "one-time" and you will be in the right ballpark. I will look up on irs.gov about direct payment of tuition...that might be the way to go.
Because it is less than 12,000 you don't have to worry about direct payment, just give it to her.
__________________
.


No more lawyer stuff, no more political stuff, so no more CYA

Martha is offline   Reply With Quote
Old 10-21-2009, 10:40 AM   #26
Thinks s/he gets paid by the post
Milton's Avatar
 
Join Date: Apr 2007
Posts: 2,079
Quote:
Originally Posted by Martha View Post
Man, you folks are tough on the OP's niece.
Perhaps because of the fact that she sent an email request, rather than calling or at least sending a proper letter ... I know that struck me as discourteous. But we don't know the background, and perhaps her request is not quite as imperious as it seems.

If the op wants to help out her niece financially, that's her business; especially as she previously set aside the money for the very purpose. As she feels a moral obligation, issues such as whether the niece is making her own contribution, or could be studying somewhere cheaper, are essentially irrelevant.

My only suggestion is that the op tell the niece about the bonds and make it clear that cashing them in and providing her with the funds is a 'one shot' deal: i.e., she shouldn't expect any additional money down the road, because there isn't any. Just give her the money with no strings attached and no future expectations on either side.

P.S. "youse"??
__________________
"To know what you prefer, instead of humbly saying Amen to what the world tells you you ought to prefer, is to have kept your soul alive". Robert Louis Stevenson, An Inland Voyage (1878)
Milton is offline   Reply With Quote
Old 10-21-2009, 11:36 AM   #27
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Sep 2005
Location: Northern IL
Posts: 18,293
Quote:
Originally Posted by Martha View Post
Because it is less than 12,000 you don't have to worry about direct payment, just give it to her.
Taxes could figure into this too, I think. IIRC, only the person actually paying the tuition can take the tax credit/deduction, ...hmmmm, maybe that is only for dependents (dependents as defined by tax laws, not FAFSA rules)?

-ERD50
__________________
ERD50 is online now   Reply With Quote
Old 10-21-2009, 02:35 PM   #28
Thinks s/he gets paid by the post
kyounge1956's Avatar
 
Join Date: Sep 2008
Posts: 2,171
Quote:
Originally Posted by Bestwifeever View Post
Kyounge, I think it's great that you're helping your niece. Remember no post here is not subject to our favorite hobby of giving unsolicited advice (I'm really good at that). Would you like me to tell you what she should major in?
You should tell her that. Unsolicited advice should always be directed at the person in the best position to flout it
__________________
kyounge1956 is offline   Reply With Quote
Old 10-21-2009, 02:41 PM   #29
Thinks s/he gets paid by the post
kyounge1956's Avatar
 
Join Date: Sep 2008
Posts: 2,171
Quote:
Originally Posted by Milton View Post
Perhaps because of the fact that she sent an email request, rather than calling or at least sending a proper letter ... I know that struck me as discourteous. But we don't know the background, and perhaps her request is not quite as imperious as it seems.
Niece is outside the country. Why would she spend desperately needed funds on a (very) long distance call when she could send email for free. The request was not imperious. If it sounded like that, my bad. She may also have tried to call me and gotten a busy signal because I was online.

Quote:
If the op wants to help out her niece financially, that's her business; especially as she previously set aside the money for the very purpose. As she feels a moral obligation, issues such as whether the niece is making her own contribution, or could be studying somewhere cheaper, are essentially irrelevant.
I don't feel like I have a moral obligation. I feel like she's my niece and I would like to help.

Quote:
My only suggestion is that the op tell the niece about the bonds and make it clear that cashing them in and providing her with the funds is a 'one shot' deal: i.e., she shouldn't expect any additional money down the road, because there isn't any. Just give her the money with no strings attached and no future expectations on either side.
As noted above I am thinking of enclosing the funds in a book of sound financial advice. The accompanying letter will definitely contain the advice to spend it wisely, because this is all there is.

Quote:
P.S. "youse"??
I'm (originally) from Queens. You got a problem widdat?
__________________
kyounge1956 is offline   Reply With Quote
Old 10-21-2009, 02:48 PM   #30
Thinks s/he gets paid by the post
kyounge1956's Avatar
 
Join Date: Sep 2008
Posts: 2,171
Quote:
Originally Posted by ERD50 View Post
Taxes could figure into this too, I think. IIRC, only the person actually paying the tuition can take the tax credit/deduction, ...hmmmm, maybe that is only for dependents (dependents as defined by tax laws, not FAFSA rules)?

-ERD50
I don't think I can deduct anything. I know I don't claim her as a dependent on my taxes and that seems to be the starting point for many things. We aunts get the short end of the stick there. It sounds like I may as well bite the bullet and pay the taxes.
__________________
kyounge1956 is offline   Reply With Quote
Old 10-21-2009, 04:15 PM   #31
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
youbet's Avatar
 
Join Date: Mar 2005
Location: Chicago
Posts: 9,965
Quote:
Originally Posted by kyounge1956 View Post
I don't think I can deduct anything. I know I don't claim her as a dependent on my taxes and that seems to be the starting point for many things. We aunts get the short end of the stick there. It sounds like I may as well bite the bullet and pay the taxes.
Speaking as a "not a tax expert," I can't think of any situation where you can help with your niece's college expenses and have it be a tax advantage for yourself. However, do a little research and see if either gifting the money directly to your neice or to her parents might allow some tax advantage to any of them when she or they pay the college bill.

I'm taking a three step approach to helping my 3 grandkids with college.

1. I contribute the max $2k/yr each to their Coverdale Educational IRA's. Their dad, my son, owns the accounts so technically I'm gifting the money to him and he's making the contributions. In actuality, I do it all with linked accounts at Schwab. Those accounts work somewhat like a Roth IRA. No deduction, but withdrawals for educational expenses (both principal and earnings) are tax free.

2. I'll gift them up to $12k/yr (current gift tax exclusion) as necessary while they actually are in school.

3. Needs beyond $12k/yr will be made directly to the school to avoid triggering any gift tax.

Of course, this all assumes DW and I are able to plod along through retirement as we have been with no/few more additional recessions or other setbacks driving our retirement portfolio to be a FireCalc failure! Only time will tell.

BTW, we grandparents don't get any tax breaks for grandkids that you aunts don't get for nieces and nephews........

Edit: Looking back at my post, a little clarifying is in order. The Coverdale IRA's (probably will be $40k - $50k in today's dollars) will be there for each grandkid when, and if, they start post secondary school. Additional funds are not a commitiment made to them apriori, but rather a commitment made to my son, their father, that I'd pay for the kid's college if required. Hey, if they get schlorships, need based aid or participate in co-op or work-study programs and don't need Papa's dough, no problem with me! This has allowed DS and DIL to focus on retirement funding and on the expenses of having a special needs child without feeling they'll never be able to help with the kids college if required. It's kind of a team thing.......
__________________
"I wasn't born blue blood. I was born blue-collar." John Wort Hannam
youbet is offline   Reply With Quote
Old 10-21-2009, 04:23 PM   #32
Thinks s/he gets paid by the post
 
Join Date: Mar 2007
Posts: 3,323
Don't have time to read all the posts, but I made my own son pay 100% for his college. He acts like he did something spectacular, but I did it, my half-brother did it, my stepfather did it, so I don't think it's anything that unusual. Regardless, I made him pay for it because I knew FOR SURE that he would do very well then. And he did: made honors in several disciplines!
I have to go along with everyone else saying skin in the game is important. However, that doesn't mean you can't buy books or something to assist if you want to; but I'm personally against the "free ride" unless the kid gets a scholarship, which is even better.
...but let me say that I would have just loved to have a relative like you when I was in college. I'm available for adoption if you're interested....
__________________
Please consider adopting a rescue animal. So very many need a furr-ever home and someone to love them! And if we all spay/neuter our pets there won't be an overpopulation to put to death.
Orchidflower is offline   Reply With Quote
Old 10-21-2009, 04:50 PM   #33
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
youbet's Avatar
 
Join Date: Mar 2005
Location: Chicago
Posts: 9,965
Quote:
Originally Posted by Orchidflower View Post
I made my own son pay 100% for his college. He acts like he did something spectacular, but I did it, my half-brother did it, my stepfather did it, so I don't think it's anything that unusual.when I was in college.
And both DW and I did it too. I was relatively lucky in that I had the appropriate FCC license and was able to be an engineer/announcer at a small radio station near school and made union wages working full time, or near full time, hours. DW had to work for the catering service that ran the cafeterias on campus and spent 4 years doing really, really, really crappy jobs for very long hours. Despite having great academic success (graduated 5th in her class with honors), 40 yrs post graduation, she still frowns when asked about her college years and has never been back to campus.

In hindsight, while we both made it though, we missed a lot of campus life by having zero time for school activities, sports events, off campus studies or anything really.

When our son went, we decided that we'd kick in so that he could experience more campus life. He co-op'd in the Mech Eng program and that easily covered his books and personal money. We paid the room, board and tuition. He did well and actually had time to attend an occasional sports event, dance, party or whatever.

There's some middle ground there. You don't have to pay 100% of your college expenses to have "buy-in." There's some room for flexibility.
__________________
"I wasn't born blue blood. I was born blue-collar." John Wort Hannam
youbet is offline   Reply With Quote
Old 10-21-2009, 05:35 PM   #34
Thinks s/he gets paid by the post
 
Join Date: Mar 2009
Location: Pittsburgh, PA suburbs
Posts: 1,769
Kyounge1956---I am really impressed by your "pay it forward" attitude in wanting to make your niece's life a little easier by contributing to her education in recognition of the fact that you, too, were the beneficiary of some help. Hopefully you will imprint her by your example, and she will make it a family legacy to assist others as she is able throughout her life. I like the idea of helping someone I care about when they need it. Lord knows, many people have helped me in this life(not necessarily speaking monetarily here), and I remain very grateful to them. I can never repay my parents as they passed away a long time ago, but I try to live by their example which sets the bar for me very high indeed.
__________________
WhoDaresWins is offline   Reply With Quote
Old 10-21-2009, 05:44 PM   #35
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
freebird5825's Avatar
 
Join Date: Feb 2008
Location: East Nowhere, 43N Latitude, NY
Posts: 9,017
This post is not meant to influence the OP on what to do/not do for the niece. That is entirely his/her business. But these self-made stories may provide a different insight into what it really means to have "skin in".

Ditto on the self-help program, except NYS awarded me (how sweet ) a full 4 year merit scholarship to any state school. The miscellaneous fees and some of room/board came from federal aid for needy students (BEOG, SEOG, NDSL, College W*rkStudy). What a deal that was!
Everything else was up to me. Mom helped a little with a $25 check here and there, but she was barely making ends meet herself.
I know there are many of us here that have the same type of story to tell. And look at us now. We are FIREd.

I rest my case, Your Honor.
__________________
"All our dreams can come true, if we have the courage to pursue them." - Walt Disney
freebird5825 is offline   Reply With Quote
Old 10-21-2009, 06:12 PM   #36
Thinks s/he gets paid by the post
kyounge1956's Avatar
 
Join Date: Sep 2008
Posts: 2,171
Quote:
Originally Posted by youbet View Post
Speaking as a "not a tax expert," I can't think of any situation where you can help with your niece's college expenses and have it be a tax advantage for yourself. (snip) BTW, we grandparents don't get any tax breaks for grandkids that you aunts don't get for nieces and nephews........
too true. However, that prevents the said nieces, nephews or grandkids from thinking we're just giving them money to get the tax deduction.

Quote:
Edit: Looking back at my post, a little clarifying is in order. The Coverdale IRA's (probably will be $40k - $50k in today's dollars) will be there for each grandkid when, and if, they start post secondary school. Additional funds are not a commitiment made to them apriori, but rather a commitment made to my son, their father, that I'd pay for the kid's college if required. Hey, if they get schlorships, need based aid or participate in co-op or work-studty programs and don't need Papa's dough, no problem with me! This has allowed DS and DIL to focus on retirement funding and on the expenses of having a special needs child without feeling they'll never be able to help with the kids college if required. It's kind of a team thing.......
I don't know about Coverdale accounts. What happens to the money in a Coverdale if it isn't used for educational expenses? Can DS & DIL access it for retirement or for costs associated with special needs? Or if one of the grandkids turns out to be an entrepreneur, can the money be used to buy or start a business?
__________________
kyounge1956 is offline   Reply With Quote
Old 10-21-2009, 09:52 PM   #37
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
youbet's Avatar
 
Join Date: Mar 2005
Location: Chicago
Posts: 9,965
Quote:
Originally Posted by kyounge1956 View Post
I don't know about Coverdale accounts. What happens to the money in a Coverdale if it isn't used for educational expenses? Can DS & DIL access it for retirement or for costs associated with special needs? Or if one of the grandkids turns out to be an entrepreneur, can the money be used to buy or start a business?
I won't try to give a complete explanation of Coverdale IRA's, you can Google that up easily enough, but my understanding is that if a child does not use the money by a certain age (late 20's, can't remember the exact age) those dollars can be redirected to another child or withdrawn but taxed as ordinary income. The definintion of educational expenses is broader than for 529B plans in that elementary school, high school, traditional college, vocational school, all count. You can also apply the funds to supplies including computers, etc.

Special needs education - yes

Parent's retirement - no

entrepreneural activities - no
__________________
"I wasn't born blue blood. I was born blue-collar." John Wort Hannam
youbet is offline   Reply With Quote
Old 10-22-2009, 12:31 AM   #38
Moderator Emeritus
Nords's Avatar
 
Join Date: Dec 2002
Location: Oahu
Posts: 26,620
Hasn't the gifting limit been raised to $13K yet? Oh, that's right, there's no inflation this year. Or at least not in the expenses that go into the CPI calculation.

Quote:
Originally Posted by kyounge1956 View Post
I have two nieces who have graduated and another one besides this one in college, and this is the first time any of them have asked me to help with college expenses, so the rest of youse can stop making those remarks that sound as if you think niece is a leech and her parents are deadbeats. Neither the nieces nor their parents make a habit of asking for handouts.
We've been down this thread a few times before.

With varying degrees of tact and good intentions, posters are concerned about "affluenza" and "a sense of entitlement". Your clarifications make the situation much less scary than it originally seemed.

I think the posters also tend to be split along the lines of who worked their way through college (and benefited thereby) vs those who were paid to go to school (and benefited thereby). Gotta know your kids beneficiary.

If I had gone to a civilian school instead of USNA I'm pretty sure that I wouldn't have made it to sophomore year. And while we're probably able to afford our kid's college expenses, her NROTC decision puts her motivation right where it should be.
__________________
*
*

The book written on E-R.org, "The Military Guide to Financial Independence and Retirement", on sale now! For more info see "About Me" in my profile.
I don't spend much time here anymore, so please send me a PM. Thanks.
Nords is offline   Reply With Quote
Old 10-22-2009, 09:41 AM   #39
Thinks s/he gets paid by the post
kyounge1956's Avatar
 
Join Date: Sep 2008
Posts: 2,171
One more question: some of the bonds are so recent that there would be a penalty if I cashed them, but other than avoiding those, does it make any difference which ones I cash first?
__________________
kyounge1956 is offline   Reply With Quote
Old 10-22-2009, 06:18 PM   #40
Thinks s/he gets paid by the post
Milton's Avatar
 
Join Date: Apr 2007
Posts: 2,079
It's up to youse.
__________________

__________________
"To know what you prefer, instead of humbly saying Amen to what the world tells you you ought to prefer, is to have kept your soul alive". Robert Louis Stevenson, An Inland Voyage (1878)
Milton is offline   Reply With Quote
Reply


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
help me help my niece simple girl Other topics 11 06-08-2009 09:32 AM
College costs - saving money in little ways Leonidas FIRE and Money 19 08-20-2007 07:15 AM
Loan Money to Child for College? TromboneAl Other topics 20 05-06-2005 05:27 PM
ER with Kids/College Money JWV Other topics 26 01-17-2005 03:34 PM
Gift for newborn niece? LRAO FIRE and Money 7 08-21-2004 08:08 PM

 

 
All times are GMT -6. The time now is 01:49 PM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2017, vBulletin Solutions, Inc.