Gifting iBonds

[Time2]

I think I saw a thread where spouses gifted each other an iBond. Is this permissible? If yes, how far can you push it.



Can my daughter and I swap gift iBonds, and my son in law, son and my wife?



That would be $50k of iBonds in a year, getting up to an amount that actually makes a difference.

 

[Gumby]

You can gift an I-Bond to anyone, including your spouse. There are two catches, however:

1. A person can only either buy for their own account or receive as a gift $10k per year. So if you buy $50k in gift bonds for someone, it will take you five years to deliver them all, and they cannot be cashed in until they are delivered to the recipient. And, during those 5 years, the recipient won't be able to buy for their own account. Also, if five people buy gift bonds for you, they cannot all deliver them to you in the same year, since the $10k limit is on the recipient. This why the young wife and I currently have only $30k in gift bonds for the other in each of our respective gift boxes, to be delivered $10k each in 1/23, 1/24 and 1/25. We don't know what I-Bond rates will do in the next 2-1/2 years, so we're currently unwilling to tie up money longer than that.

2. If the recipient is a non-spouse, you need to be cognizant of the $16k annual gift tax threshold (especially if you give them other money).

 

[Time2]

OK, $10,000 hard limit per year. Oh well!
Thanks

 

[pb4uski]

You can expand the "hard" $10k annual allowance in a few ways. One, you can get $5k in paper i-bonds with your income tax refund and then either keep the paper bonds or send them in and have they added to your Treasury Direct account.

Second, you can set up multiple living trusts and the living trusts can by i-bonds. I set up his, her and our trusts for about $30 in notary fees since I already owned Willmaker to do the trust documents. The trusts then bought $10k of -bonds each.

I gave thought to having more than 3 living trusts... his1, his2, her1, her2, joint1, joint2... but I didn't want to get too greedy.

So for DW and I our annual allowance is $55k... $10k each personally, $10k each for his, her and joint living trusts and $5k with our tax return.

 

[GTFan]

Third, you can create businesses with EINs (simple to do) and buy $10k each on those. You'd have to figure out how many you can get away with on that approach.

 

[pb4uski]

^^^ good point, I knew that but forgot to include it.

 

[qwerty3656]

Third, you can create businesses with EINs (simple to do) and buy $10k each on those. You'd have to figure out how many you can get away with on that approach.

I have a sole proprietorship with an EIN (I was self employed before I retired, with 1099 income). If I don't have 1099 income for 2022, can I still buy 10k in bonds with this EIN?

 

[pb4uski]

Yes, as long as the entity (corp, LLC or whatever) is still legally valid (you're filing annual reports with the secretary of state, etc.).

For our living trusts, there is no EIN so I used our SSNs.

 

[Montecfo]

You can expand the "hard" $10k annual allowance in a few ways. One, you can get $5k in paper i-bonds with your income tax refund and then either keep the paper bonds or send them in and have they added to your Treasury Direct account.

Second, you can set up multiple living trusts and the living trusts can by i-bonds. I set up his, her and our trusts for about $30 in notary fees since I already owned Willmaker to do the trust documents. The trusts then bought $10k of -bonds each.

I gave thought to having more than 3 living trusts... his1, his2, her1, her2, joint1, joint2... but I didn't want to get too greedy.

So for DW and I our annual allowance is $55k... $10k each personally, $10k each for his, her and joint living trusts and $5k with our tax return.

Pb4uski,

On trusts, how do the bonds pass from trust to individual? Or will they just remain on trust?

Thanks

 

[pb4uski]

The trustee of the living trust can decide to distribute the trust assets to the beneficiary at any time of their chosing. In the case of my trust, the trustee is me, the beneficiary is myself and the grantor is I... me, myself and I... get it?

 

[Montecfo]

The trustee of the living trust can decide to distribute the trust assets to the beneficiary at any time of their chosing. In the case of my trust, the trustee is me, the beneficiary is myself and the grantor is I... me, myself and I... get it?

That was my thinking since grantor trust.

But let's say you fund the trust, buy ibonds one day, and distribute to yourself next day.

Works? Just seems too good to be true.

 

[pb4uski]

That was my thinking since grantor trust.

But let's say you fund the trust, buy ibonds one day, and distribute to yourself next day.

Works? Just seems too good to be true.

I think that at a minimum that you would need to wait for a year. You could then redeem the ibonds and distribute the proceeds to the trusts beneficiary. I don't think that you can distribute the ibonds to the beneficairy without redeeming them.

I'll leave them in there for quite a while... at least the one year lock-up period and perhaps even longer as long as ibonds are competitive with 1-3 year CDs. I'll probably redeem them and distribute the proceeds to the beneficiary at some point to make things simpler for DD and DW if I get hit by a beer truck.

 

[Montecfo]

That makes sense. Keep them there till they run their course.

But since a grantor trust is by definition revocable, I do wonder jow they would treat that.

Probably asking too much when whole purpose of trust is to get around purchase limits.

 

[pb4uski]

That makes sense. Keep them there till they run their course.

But since a grantor trust is by definition revocable, I do wonder jow they would treat that.

Probably asking too much when whole purpose of trust is to get around purchase limits.

I dunno.. it just says "Trust" and isn't specific about revocable or irrevocable.

 

[Montecfo]

Did you create a trust document? That should control.

If the trust is not paying its own taxes then that would be a grantor trust. Generally revocable.

https://www.thebalance.com/what-are-grantor-trusts-and-how-can-they-be-changed-3505545

 

[pb4uski]

Yes, all our trusts have revocable living trust documents... signed, witnessed and notarized.

And yes, these are disregarded entities for tax purposes... the TIN for the trusts used when I set them up on TD were our SSNs.