Being asked to be an executor is an honor you might want to pass up.
Settling an estate typically involves tracking down and appraising assets, paying bills and creditors, filing final tax returns and distributing whatever’s left to the heirs. At best, the process is time-consuming. At worst, it takes hundreds of hours, exposes you to lawsuits and thrusts you into the middle of family fights.
Robert Braglia of New York, a certified financial planner, was executor of an estate where the woman disowned three of her four children and left most of her money to just one of her many grandchildren. That could have caused an uproar even if the family got along, which it didn’t: Two of the woman’s children were fighting over the woman’s ashes before she actually died.
“Even without conflicts — which there always are — it is an enormous job,” Braglia says.
Before you agree to take on this role, be clear on what’s involved.
You could be doing it for many months
The time involved in settling an estate varies enormously. A small estate with few debts might be distributed within six to 12 months. It may take years to finalize a large estate with contentious heirs, lots of creditors or assets that are difficult to value, such as a business or rare collectibles.
A survey by EstateExec, an online tool for executors, found the typical estate took about 16 months to settle and required 570 hours of effort. The largest estates, worth $5 million or more, took 42 months and 1,167 hours to complete.
That doesn’t necessarily mean the executor has to put in that many hours, says CFP Russ Weiss of Doylestown, Pennsylvania. An executor can use some of the estate’s funds to hire an attorney and other help that could be more efficient than trying to figure everything out on their own.
“If you have other professionals involved — an attorney, a CPA, an investment person or wealth advisor — they’re doing most of the heavy lifting,” Weiss says. “Executors are like the quarterback in the administration of the estate.”
Executors may also collect a fee, with the amount depending on state law or what’s specified in the estate documents.
You might have a tough time finding assets
Even with help, executors should expect to spend many hours finding documents, inventorying assets and debts, arranging appraisals, communicating with financial institutions and government agencies, managing property and keeping careful records. If the estate includes a home, the house may have to be emptied of possessions and readied for sale.
The less organized the estate, the more time it may take to track down assets. EstateExec CEO Dan Stickel said his father, who died at 69, rented multiple storage sheds without telling his children where they were. Finding the various backyard sheds was challenging enough, but then they had to sort through the dusty contents. Those included piles of newspapers, battered furniture and several bars of silver bullion hidden under a dirty tarp.
Even then, they missed something. The auction company Stickel hired to dispose of the rest of the sheds’ contents found a box containing $30,000 in savings bonds. Fortunately, the company returned the bonds to the family.
You could be sued
Executors have a fiduciary duty to the beneficiaries, which means the executor is required to put the beneficiaries’ interests first. People are typically advised to choose executors who are responsible, honest, diligent and impartial.
“It’s an honor. If somebody asks you, it’s to say, ‘I trust you, and I trust you implicitly that you will handle my affairs in a way that’s fair,’” Weiss says.
But the fiduciary duty comes with potential legal and financial consequences. Executors can be held personally responsible for mistakes and other problems. For example, one child may remove items from a parent’s home that are bequeathed to another child. The heir whose items were taken could sue the executor for failing to secure the home.
Executors also may have to make judgment calls, such as whether to spend the estate’s money to fix up a house for sale and if so, how much. Unhappy heirs can sue over those decisions, as well.
Given everything that can go wrong and the time commitment, people should think carefully about whether they really want the job before agreeing to be an executor, says CFP Kate Gregory of Huntington Beach, California, who has settled both her mother’s and her husband’s estates.
Gregory says she would agree to serve again only if a family member asked, and only if there wasn’t likely to be a lot of conflict among the beneficiaries. Even then, she would want to see the will or trust documents to ensure there aren’t any unpleasant surprises that could cause discord. She also would insist that the documents name alternates in case she can’t or won’t serve. No one can be forced to be an executor, but Gregory says she would feel better about saying “yes” if she knew there was a plan should she later say “no.”
“I want to make sure that I could resign,” she says.
This article was written by NerdWallet and was originally published by The Associated Press.
The 2021 tax-filing season officially gets underway Feb. 12, when the IRS starts accepting 2020 tax returns and the clock thus starts counting down until April 15.
If you hope to get a tax refund this year — or even if you simply hope to get a bigger refund next year — here are several things you should know.
1. Electronic filing and direct deposit speed your refund
Filing your tax return electronically and opting to receive your refund via direct deposit into your bank account — rather than, say, via mailed check — is the best way to speed your refund, according to the IRS.
Filing electronically also is the best way to minimize errors, which in themselves can delay your refund. The IRS explains:
“Even though the IRS issues most refunds in less than 21 days, some tax returns require additional review and take longer to process than others. This may be necessary when a return has errors, is incomplete or is affected by identity theft or fraud.”
2. You can split your refund between multiple accounts
Another benefit of receiving your refund by direct deposit is that you will be able to choose between having the entire amount sent to one account or having it split up between two or three. These can be bank accounts or individual retirement accounts.
So, you could have a portion of your refund deposited into your checking account, another portion into your savings account and the rest into your IRA, for example.
Of course, Uncle Sam also gives you the option to use your refund to buy up to $5,000 in U.S. savings bonds.
Breaking up your refund in any of these ways is easiest if you use tax software or tell your tax professional, but you also can do it on paper using IRS Form 8888.
3. Filing early helps keep crooks’ hands off your refund
Filing your taxes early on helps keep criminals from exploiting your tax information for their own gain.
As we explain in “Beware These 6 Income Tax Scams,” thieves who get hold of your personal information can then turn around and file a tax return in your name:
“They use your name, address, Social Security number and other personal data to fill out and file a fake tax return in your name. Then, they get a big refund. Meanwhile, the IRS rejects your actual return because the agency thinks you already filed. The problem can be fixed, but it’s a giant headache.”
The earlier in the tax-filing season that you file your return, the less time crooks have to pull off such a scheme.
4. Rushing your return can slow your refund
While it’s smart to file your tax return sooner rather than later, there is such a thing as filing too soon.
The IRS urges taxpayers to have all their 2020 tax documents, such as Form W-2, in hand before filing their 2020 return. This will help avoid errors and thus avoid refund delays.
“Taxpayers need their W-2s to file accurate tax returns, as the form shows an employee’s income and taxes withheld for the year,” the IRS explains.
Other types of tax documents you would need in hand before filing might include:
5. Claiming certain tax credits can slow your refund
If you claim the earned income tax credit or the additional child tax credit, the IRS won’t issue your refund before mid-February. This is required by law and applies to your whole refund, not just the portion from either of those tax credits.
The IRS says it expects that most refunds related to either of those credits will reach taxpayers by the first week of March, assuming taxpayers choose direct deposit and their returns have no other issues.
6. This year, you may be able to use your 2019 income to fatten your refund
Under the Taxpayer Certainty and Disaster Tax Relief Act of 2020, taxpayers may use their 2019 earned income, rather than their 2020 earned income, to determine if they qualify for the earned income tax credit and, if so, to calculate how much the credit is worth for them this year. (The same “look-back” provision also applies to the additional child tax credit.)
The IRS describes the earned income tax credit as “the federal government’s largest refundable federal income tax credit for low- to moderate-income workers.”
Allowing these workers to use their 2019 earned income to calculate the credit this year means more stand to benefit from the credit. The IRS explains:
“To qualify for EITC, people must have earned income, so this option may help workers who earned less in 2020, or received unemployment income instead of their regular wages, get bigger tax credits and larger refunds …”
Because the earned income tax credit is refundable, eligible taxpayers receive the full amount of the credit that they qualify for in their refund, even if they don’t owe taxes.
7. You can check the status of your refund online
Once you’ve filed your return, you can check the status of your refund by using the Where’s My Refund? tool on the IRS website or by using the IRS2Go mobile app.
Generally, refund information will be available via the online tool and mobile app within 24 hours of the IRS acknowledging receipt of an electronically filed tax return, the IRS says.
8. It might be time to adjust your withholding
If you are disappointed by this year’s tax refund — or even worse, if you find that you owe money — you can avoid a similar fate next year by adjusting your withholding now.
Having more money taken out of your paycheck — or even your retirement income — for taxes throughout the year will mean you are less likely to owe money to Uncle Sam at tax time, and more likely to get a refund.
Of course, getting a refund is not necessarily a good thing. It means you effectively gave an interest-free loan to the government.
That is another reason why adjusting your withholding now is smart. You can do this online using the IRS Tax Withholding Estimator tool.
If you decide to adjust the withholding from your paycheck, fill out a new Form W-4 to give your employer.
To adjust the withholding from Social Security benefits, use Form W-4V as we detail in “An Easy Way to Avoid a Tax Day Bill on Your Social Security Income.” To adjust withholding from a pension, annuity or certain other types of deferred compensation, use Form W-4P.
9. You can make your refund more valuable
Like any windfall, a tax refund could be worth more than its face value — if you put it to use in a way that saves you money or builds your wealth.
For ideas, check out “6 Ways to Use Your Tax Refund to Become Richer.”
Disclosure: The information you read here is always objective. However, we sometimes receive compensation when you click links within our stories.
If you’re one of the millions of Americans who have declared bankruptcy, financial recovery can seem like a pipe dream. But don’t give up. According to a study by the Consumer Financial Protection Bureau, people’s credit scores increased steadily after filing for bankruptcy. While any credit improvement is good news, is it enough to offer a chance at homeownership? Here’s what you need to know about buying a house after bankruptcy.
5 Steps to Buying a House After Bankruptcy
The good news is that you can still buy a home after bankruptcy. However, your journey may require a bit more effort, organization, and time than the average prospective homeowner. You’ll need to wait until a judge discharges your bankruptcy before you can get a loan, but beyond that it largely depends on how quickly you can get your finances in order.
Bankruptcy isn’t something anyone wants, but for people in dire financial trouble, it can be the only way to wipe out liabilities and get a fresh start. Bankruptcy can reduce financial stress, letting you focus on making positive financial decisions for your future. If you’re ready to move forward and make your dream of owning a home a reality, start working on these strategies today.
Note: Bankruptcy is a complicated legal matter. Please consult with a bankruptcy lawyer about your financial options before and after taking the step to file for bankruptcy.
1. Reorganize Your Finances
Once some of your debts are discharged in bankruptcy, you’ll be on the road to recovery. But don’t rush out to get a home just yet—wait for the dust to settle and get your finances in order.
Examine Your Debts and Credit Report
Take stock of where you are financially now that a few of your debts have been discharged. Next, get a copy of your credit report. If you have a copy of your report prior to filing for bankruptcy, use it to create a before-and-after picture of your finances. Make it a regular practice to review your credit so you can proactively watch for any mistakes and get them corrected. It’s also encouraging to see the progress you’re making over time.
Put a Budget Together
Take control of your monthly household budget, paying every one of your bills on time, every time. Figure out your monthly income and expenses, so you know what you have room for—and what you don’t. Anticipate upcoming annual costs, like taxes or car registration, and put money aside so that you aren’t scrambling to scrape up the funds when these costs are due.
Consider a Credit Card
You can also start building your credit by using a credit card to pay some of your monthly bills. If you choose to do this, make sure you use the credit card like cash and pay it off every month. If you keep a close eye on your budget, pay all bills on time and monitor your credit report, you’ll start to see positive change that will get you closer to buying a house.
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2. Grow Your Savings
If you’re interested in buying a house after bankruptcy, building up your savings is one of the most important things you can do. Now that you’ve refamiliarized yourself with your finances, it’s time to start saving.
Figure Out How Much You Can Save
One of the positive side effects of bankruptcy is that you’ll have the breathing room to start putting away a little bit of money every paycheck. And it doesn’t matter how small that amount is. It’s helpful to get into the habit of saving—even if you can spare only $5 every two weeks. Of course, the more money you can save, the better, but start saving no matter how much you can contribute.
An easy way to develop the habit of saving—and putting money towards a down payment—is to use a “forced savings” method. With this method, the money is put into savings before you even see it. The most common technique is to schedule an automatic deduction from your paycheck or checking account that transfers directly into a savings account.
Round-up apps are another easy way to save. They work by siphoning away small amounts here and there as you purchase daily necessities. You might not notice the difference between a $1.75 purchase and a $2.00 purchase, but over time you’ll appreciate the increase in your savings account.
Set an Objective
After you determine how much you can squirrel away each month, set a goal amount for your future home’s down payment. It’s recommended to put down 20% of the overall purchase price when you buy a new home. Although you can get some home loans with a smaller down payment, 20% saves you money on mortgage insurance and your monthly payment. It also gives you some instant equity in your new investment.
3. Make a Plan
There’s more to homeownership than signing on the dotted line and paying the mortgage every month. For example, as the homeowner, you’re responsible for any surprises that come up, which can be anything from a clogged drain to a new roof. Extra expenses like these are part of the homeownership package.
If you’re intimidated and worried that it might be too hard to buy a house after bankruptcy, just take it slow. The following suggestions will help you look at each piece of the puzzle without becoming overwhelmed.
Calculate What You Can Afford
In addition to saving up for a down payment, you should adjust your monthly spending to account for the overall cost of maintaining a home. Conventional wisdom is that you shouldn’t spend more than 30% of your income on housing expenses—including the mortgage payment. Before you set your heart on that darling Craftsman house, use this online calculator to find out exactly how much home you can afford.
Schedule an Inspection
When you’re shopping for a home, make sure you get a thorough appraisal and home inspection to help identify any potential problems that’ll need to be fixed within the first few years. If you don’t think you’d be able to afford those repairs, consider moving on to a different house. You don’t want to fall into credit card debt because of a surprise furnace replacement.
Consider Additional Costs and Factors
On top of significant home repairs, you should also prepare for regular maintenance, such as landscaping, pest control, and snow removal. Depending on your location, you may also need extra insurance for floods or earthquakes.
4. Organize Your Financial Documentation
Because you went through a bankruptcy, you know what it’s like to compile months—or even years—of pay stubs, account statements, tax returns, lists of assets, and other financial documentation. While buying a house after bankruptcy isn’t as rigorous as going through the legal process of reorganizing your debts, many of the same records are required for mortgage applications.
If you know you want to buy a home, you should start keeping meticulous financial records right now. Having organized financial records shows that you are sensitive to the details. If you have a finger on the pulse of your finances, you’ll know what your budget is, what your net worth is, and when you are creditworthy for a home.
Unfortunately, even in an electronic world, paper is still king when it comes to mortgage approval. You should keep both electronic and paper records. Have a copy of your bankruptcy petition ready, and add it to your credit report and bankruptcy discharge documentation.
An easy way to get your financial documents organized is to split them into different categories.
Bank, credit card, and loan statements
Investments—such as savings bonds, retirement accounts, and stocks
Legal documents—like your bankruptcy petition and marriage or divorce records
Employment records—including pay stubs
Medical bills—especially if you’ve had large medical expenses
As you get closer to making a home purchase, find out in advance what documents the lender requires and make sure you have everything in place. A missing paper can delay closing on the loan and cost you extra money.
5. Shop Around for Mortgages
Buying a house is one of the biggest purchases you’ll ever make, so it pays to compare lenders when you’re ready to take the plunge. Many people overlook shopping for the best mortgage because it’s more fun to hunt for your dream house. Don’t make that mistake.
There’s more to the cost of a mortgage than the interest rate. You need to look at the whole picture to make sure you’re getting the best deal for your financial situation. If you’re coming off a recent bankruptcy, you should expect a higher interest rate right out of the gate.
Determine Which Loan Type You Need
Consider what type of loan is best for you. Conventional loans are offered by private lenders like mortgage companies, credit unions, and commercial banks. These loans tend to have more rigid criteria for approval but include more flexibility after the loan is secured. Government loans are also available.
The best-known government loan is the FHA loan, which is backed by the Federal Housing Administration. These loans usually have more flexible income and down payment requirements. However, FHA loans often restrict your ability to rent out or flip the property because these loans are intended for first-time or low-income homebuyers who are expected to make the house their primary residence.
Know Your Interest Rate Options
When it comes to the nature of financing, you can get either a fixed-rate or an adjustable-rate mortgage. With a fixed rate, you are locked into the interest rate available at the time you sign your loan documents. This lets you have a stable mortgage payment, but you have to refinance if you ever want a lower rate. Adjustable-rate mortgages rise and fall with the market. This unpredictability means you could end up with a much larger monthly payment than you started with.
Don’t Forget About Additional Fees and Expenses
Fees for appraisals, inspections, title processing, and escrow needs can pile up fast. These fees can either be added to your up-front expenses or rolled into your loan. If combined with your loan, these costs will impact your monthly payment and the total interest you pay over the lifetime of the loan.
Because you’re getting a mortgage after bankruptcy, make sure the terms and extra fees make sense for your future goals. You’ve worked hard to rebuild your credit so you can buy a home. You don’t want to end up drowning under an interest rate or heap of fees that you can’t comfortably afford. An online mortgage calculator can help you research the impact of your location, credit rating, and type and length of loan on your interest rate and estimated monthly payments.
Homeownership After Bankruptcy
There is life—and homeownership—after bankruptcy. You’ve been given a chance to build a new financial future. Start with a clear understanding of where your credit stands. Then use the five steps listed above to help you buy your dream house.
A savings bond used to be a common gift, though not always a welcome one. Well-meaning relatives gifted savings bonds for your birthday or the holidays. The goal was often to help you pay for college in the future. But for us kids, all we knew was it wasn’t the Pound Puppy or Care Bear we really wanted!
Nowadays 529 plans and other higher-interest earning options have replaced the savings bond. But that doesn’t mean they’ve disappeared. In fact, they may be sitting at the back of your closet right now. But you are cleaning out your closet or your safe deposit box, and now this long-forgotten and unexpected savings bond can help you clean up your finances.
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It’s Still Good
That savings bond is still worth something. That’s the good news. Savings bonds gain value over time by earning interest and keep earning interest for 30 years. They pay interest every six months until they mature. So depending on how long it’s been since you cleaned your closet, you may still be making money as you read this. Now there are some steps you have to take to get money in return.
What Type of Savings Bond
There are several kinds of savings bonds. So you much determine which kind you have in your possession. Savings bonds are a contract between you and the federal government. If it’s an old bond from your childhood it is probably either an EE or an I bond. It will be clearly specified in the title which one you have.
EE bonds are similar to savings accounts. Paper bonds used to be sold at half the face value (you paid $50 for a $100 bond) and the interest continued to increase even after the face value is reached, so your $100 savings bond is probably worth more than $100 now. Paper EE bonds are no longer available and digital EE bonds are purchased at face value.
I bonds are similar to EE bonds. The chief difference is that the interest earned on an I bond is determined by a combination of a fixed rate and an inflation rate. So there is some cost-of-living protection for the bondholder.
Find Out What It’s Worth
Before you decide to cash in the savings bond, you’ll probably want to know what it’s worth. The interest rates and even the way interest rates are determined have changed over the years so it matters when you got yours. The best way to determine the current value of your savings bond is to use the Treasury Direct website. Whether you want to cash in the bond or continue to let it mature is then up to you.
There are some penalties for cashing in the savings bond early. If you redeem the bond early, you will lose three months’ worth of interest during the first five years. There are no penalties after five years. The earliest you can cash in the bond is after one year. If the bond is more than 30 years old, it has stopped earning interest and you should cash it in.
While you will have to pay federal taxes on your bonds, you do not have to pay state or local income taxes. There are some exemptions – most notably when bonds issued after 1989 are cashed in to pay qualified higher education expenses at an eligible institution.
Visit the Bank
Most banks should be able to help you cash your paper bonds. If they aren’t, they should be able to direct you to a financial institution that can. You will have to prove your identity to cash in your old bonds. You will have to fill out an tax form either when you redeem the bonds or at the end of the year. Your tax preparer should be able to help you with this part of the process.
How to Avoid Paying Taxes on a Savings Bond – SmartAsset
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Savings bonds can be a safe way to save money for the long term while earning interest. You might use savings bonds to help pay for your child’s college, for example, or to set aside money for your grandchildren. Once you redeem them, you can collect the face value of the bond along with any interest earned. It’s important to realize, however, that interest on savings bonds can be taxed. If you’re wondering, how you can avoid paying taxes on savings bonds there are a few things to keep in mind. Of course, one key thing to keep in mind is that a financial advisor can be immensely helpful in minimizing your taxes.
How Savings Bonds Work
Savings bonds are issued by the U.S. Treasury. The most common savings bonds issued are Series EE bonds. These electronically issued bonds earn interest if you hold them for 30 years. Depending on when you purchased Series EE bonds, they may earn either a fixed or variable interest rate.
You can buy up to $10,000 in savings bonds per year if you file taxes as a single person. The cap doubles to $20,000 for married couples who file a joint return. If you decide you want to use some or all of your tax refund money to purchase savings bonds, you can earmark an additional $5,000 for Series I bonds. These are paper bonds, not electronic ones.
When Do You Pay Taxes on Savings Bond Interest?
When you’ll have to pay taxes on Treasury-issued savings bonds typically depends on the type of bond involved and how long you hold the bond. The Treasury gives you two options:
Report interest each year and pay taxes on it annually
Defer reporting interest until you redeem the bonds or give up ownership of the bond and it’s reissued or the bond is no longer earning interest because it’s matured
According to the Treasury Department, it’s typical to defer reporting interest until you redeem bonds at maturity. With electronic Series EE bonds, the redemption process is automatic and interest is reported to the IRS. Interest earnings on bonds are reported on IRS Form 1099-INT.
It’s important to keep in mind that savings bond interest is subject to more than one type of tax. If you hold savings bonds and redeem them with interest earned, that interest is subject to federal income tax and federal gift taxes. You won’t pay state or local income tax on interest earnings but you may pay state or inheritance taxes if those apply where you live.
How Can I Avoid Paying Taxes on Savings Bonds?
Whether you have to pay taxes on savings bonds depends on who owns it. Generally, taxes are owed on interest earned if you’re the only bond owner or you use your own funds to buy a bond that you co-own with someone else.
If you buy a bond but someone else is named as its only owner, they would be responsible for the taxes due. When you co-own a bond with someone else and share in funding it, or if you live in a community property state, you’d also share responsibility for the taxes owed with your co-owner or spouse.
Use the Education Exclusion
With that in mind, you have one option for avoiding taxes on savings bonds: the education exclusion. You can skip paying taxes on interest earned with Series EE and Series I savings bonds if you’re using the money to pay for qualified higher education costs. That includes expenses you pay for yourself, your spouse or a qualified dependent. Only certain qualified higher education costs are covered, including:
Equipment, such as a computer
You can still use savings bonds to pay for other education expenses, such as room and board or activity fees, but you wouldn’t be able to avoid paying taxes on interest.
Additionally, there are a few other rules that apply when using savings bonds to pay for higher education:
Bonds must have been issued after 1989
Bond owners must have been at least 24 years of age at the time the bonds were issued
Education costs must be paid using bond funds in the year the bonds are redeemed
Funds can only be used to pay for expenses at a school that’s eligible to participate in federal student aid programs
If you’re married you and your spouse have to file a joint return to take advantage of the education exclusion. And any money from a savings bond redemption that doesn’t go toward higher education expenses can still be taxed at a prorated amount.
There are also income thresholds you need to observe. For 2020, single tax filers can earn up to $82,350 and benefit from the full exclusion. Married couples filing jointly can do so with up to $123,550 in income. Once your income passes those limits, the amount of interest you can exclude is reduced until it eventually phases out altogether.
Roll Savings Bonds Into a College Savings Account
Another strategy for how to avoid taxes on savings bond interest involves rolling the money into a college savings account. You can roll savings bonds into a 529 college savings plan or a Coverdell Education Savings Account (ESA) to avoid taxes.
There are some advantages to either approach. With a 529 college savings plan, you can continue saving money on a tax-advantaged basis for higher education. You won’t pay any taxes on money that’s withdrawn for qualified education expenses. And if you have multiple children, you can reassign the account to a different beneficiary if one child decides he or she doesn’t want to go to college or doesn’t use up all the money in the account.
Contributions to 529 college savings accounts aren’t tax-deductible at the federal level, though some states do allow you to deduct contributions. You don’t have to live in any particular state to invest in that state’s 529 and plans can have very generous lifetime contribution limits. Keep in mind that gift tax exclusion limits still apply to any money you add to a 529 on a yearly basis.
Coverdell ESAs have lower annual contribution limits, capped at $2,000 per child. You can only contribute to one of these accounts on behalf of a child up to their 18th birthday. Withdrawals are tax-free when the money is used for qualified education expenses. But you have to withdraw all the funds by age 30 to avoid a tax penalty.
The Bottom Line
Savings bonds typically offer a lower rate of return compared to stocks, mutual funds or other higher-risk securities. But they can be a good savings option if you want something that can earn interest over the long term. Minimizing the taxes you pay on that interest may be possible if you have children and you plan to use some or all of your savings bonds to help pay for college. Talking to a tax professional can also help with finding other college tax savings strategies.
Tips for Investing
Consider talking to a financial advisor about the best ways to manage savings bonds in your portfolio. If you don’t have a financial advisor yet, finding one doesn’t have to be difficult. SmartAsset’s financial advisor matching tool can make it easy to connect with professional advisors locally in just minutes. If you’re ready, get started now.
Savings bonds purchased on behalf of grandchildren don’t receive the same tax treatment for higher education purposes. Generally, the education exclusion only applies if the grandparent is claiming a grandchild on their taxes as a dependent. If your parents are interested in helping pay for your child’s college expenses, you may encourage them to open a 529 college savings account instead, then roll the bonds into it to avoid paying taxes on interest earned.
Rebecca Lake Rebecca Lake is a retirement, investing and estate planning expert who has been writing about personal finance for a decade. Her expertise in the finance niche also extends to home buying, credit cards, banking and small business. She’s worked directly with several major financial and insurance brands, including Citibank, Discover and AIG and her writing has appeared online at U.S. News and World Report, CreditCards.com and Investopedia. Rebecca is a graduate of the University of South Carolina and she also attended Charleston Southern University as a graduate student. Originally from central Virginia, she now lives on the North Carolina coast along with her two children.