Buying I Bonds In Trust?

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Jogger
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Joined: Tue Apr 28, 2020 9:45 pm

Buying I Bonds In Trust?

Post by Jogger »

I'm considering buying some I bonds before the end of October to get six months of the old rate before the upcoming new rate in November. The treasury direct site allows me to create an account as an individual, or as a trust. I have a trust, but was wondering how the taxes work if I buy them under my trust. I don't see any way to make the trust the beneficiary of the account, so am considering creating a TD account for the trust. I suspect my trust lawyer would want this.

Does having a trust own the account complicate taxes?
Would an account owned by a trust be taxed the same as my individual rate?
Are any other considerations?

Thanks
furwut
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Re: Buying I Bonds In Trust?

Post by furwut »

Topic Author
Jogger
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Re: Buying I Bonds In Trust?

Post by Jogger »

by furwut » Wed Oct 20, 2021 10:07 pm

This may be useful:
The Finance Buff: Buy More I Bonds at TreasuryDirect in a Revocable Living Trust
Thanks, lots of good info. It sounds like any interest would just be reported on my 1040 if owned by my trust. Our trusts, mine an DWs, don't have tax identification numbers since were both still alive, just SSNs. It still seems somewhat complicated to buy under the trust. I'm not trying to buy 2x or 20K, just trying to avoid probate in case something happened. Maybe I'll ask my trust lawyer, but may not like the answer. However, if I'm dead anyway, maybe it doesn't matter, not that I plan to decease anytime soon :happy .
DesertGator
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Re: Buying I Bonds In Trust?

Post by DesertGator »

What you want to do is as simple as pie. Assuming we are talking about a revocable living trust, you just go on the treasury direct site and create that type of account. Use the SSN that you use for the trust. List yourself as the trustee.

Connect to a bank account and you're in business. I can't remember if TD will require that you send them the certificate of trust or proof of the trust existence. This might throw a wrench in the works as the delay could prevent you from buying before the end of October. No big deal you can still buy before the end of December to get this year's allocation.

I can't imagine why you would need an attorney involved with this. A revocable living trust is not a separate taxable entity, nor are there any thorny issues to deal with. This is not much different than opening a savings account for the LT.

Good luck!
SnowBog
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Re: Buying I Bonds In Trust?

Post by SnowBog »

Jogger wrote: Wed Oct 20, 2021 10:37 pm It still seems somewhat complicated to buy under the trust. I'm not trying to buy 2x or 20K, just trying to avoid probate in case something happened. Maybe I'll ask my trust lawyer, but may not like the answer. However, if I'm dead anyway, maybe it doesn't matter, not that I plan to decease anytime soon :happy .
To my mind, I think you are over complicating this... I'm not seeing a benefit of buying them in a trust - especially if that's only to avoid probate.

What's your estate look like? Who gets your assets when you are gone? I assume you have a will to direct assets that aren't otherwise distributed?

For us, we have an individual account for each of us. Within each, we buy bonds with the spouse as a co-owner (more like beneficiary). When the first of us dies, we can have the bonds reissued with another person (likely our only child who will inherit the bulk of what we leave behind, if we had more heirs we could buy say 3x $3,333 bonds and then could title one for each).

Because we want more I Bonds, we also buy via a trust for each of us. Those are titled in the name of the trust and its trustees. Our will states what happens to these trusts, and how the money is supposed to be distributed.

And taxes are only relevant when you sell. That's one of the benefits of savings bonds, you can defer taxes for up to 30 years. This allows the executor of our estate determine if its better to sell while in our estate and distribute the proceeds or to request the bonds to be distributed directly to our heirs and they can determine when to sell (and pay the resulting taxes).
sgm7091
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Re: Buying I Bonds In Trust?

Post by sgm7091 »

We recently setup a revocable trust and set up treasurydirect account. Our revocable trust is setup as AND. But it’s clause in trust allows either to make decisions. Site accepted it and the bank transfer should occur before end of month. Unless you need for other reasons, we did not get a separate EIN for trust. Using our SSNs. Will see if there is any issues.

One question, for such joint trust or OR trust, can two treasurydirect accounts be setup under one trust name but using each spouses SSN?
Topic Author
Jogger
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Re: Buying I Bonds In Trust?

Post by Jogger »

In that link to the finance buff website above, under the Q&As at the end, I think someone may have asked that same question. I think, but don't trust me, the answer of an OR trust was to pick one of the spouses SSNs.
sgm7091
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Re: Buying I Bonds In Trust?

Post by sgm7091 »

I think so too logically- because it is one trust and one account. Though treasurydirect site might not be able detect.
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HueyLD
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Re: Buying I Bonds In Trust?

Post by HueyLD »

sgm7091 wrote: Thu Oct 21, 2021 7:15 am I think so too logically- because it is one trust and one account. Though treasurydirect site might not be able detect.
Per TD https://www.treasurydirect.gov/indiv/he ... rnmore.htm

“ An entity is not permitted to:

Have more than one registration per account“
sgm7091
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Re: Buying I Bonds In Trust?

Post by sgm7091 »

Thank you for pointing that out.
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HueyLD
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Re: Buying I Bonds In Trust?

Post by HueyLD »

SnowBog wrote: Wed Oct 20, 2021 11:45 pm And taxes are only relevant when you sell. That's one of the benefits of savings bonds, you can defer taxes for up to 30 years. This allows the executor of our estate determine if its better to sell while in our estate and distribute the proceeds or to request the bonds to be distributed directly to our heirs and they can determine when to sell (and pay the resulting taxes).
Wanted to add additional clarification to the above comment.

One can choose to pay taxes every year without having to redeem anything.

Per TD:

“ When must I report the interest on my tax form?

You have a choice. You can

report the interest every year

put off (defer) reporting the interest until you file a federal income tax return for the year in which the first of these events occurs:

you cash the bond and receive what the bond is worth, including the interest, or

you give up ownership of the bond and the bond is reissued, or

the bonds stops earning interest because it has reached final maturity.”

As such, interest is reportable when ownership changes.

“ You give up ownership of the bond and the bond is reissued.

You owe tax on the interest the bond earned until it was reissued.”

“You are the new owner of a bond that was reissued.

You owe tax on the interest the bond earns after it was reissued but when or after you cash the bond, the 1099-INT (see below) will show all interest earned from date of issue, including interest earned before it was reissued. See instructions in IRS Publication 550. for paying tax only on interest earned after the bond was reissued. “

https://www.treasurydirect.gov/indiv/re ... nsider.htm
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