Reply To: What is a “Gift” at TreasuryDirect on Saving Bond purchase?

Home Fairmark Forum Kids and College What is a “Gift” at TreasuryDirect on Saving Bond purchase? Reply To: What is a “Gift” at TreasuryDirect on Saving Bond purchase?

#72555
Kaye Thomas
Moderator

Alas, this is not quite as simple as you would like. It appears you have three alternatives. Information about how to do them can be found on the following page:

https://www.treasurydirect.gov/indiv/help/TDHelp/howdoi.htm

First, you can create a custodial account. If you do this you will be making a gift, but this is [b]not[/b] done by designating the bond as a gift. Follow the instructions on the page linked above for opening an account for a minor. Your son will own the account, but you will control it as custodian, so you can sell the bond if you decide the time is right. There are drawbacks, however, including a legal requirement to transfer control of the account to your son at age 18. You may or may not want control to extend beyond that age. For more on this, skim through our pages on custodial accounts for minors:

UGMA & UTMA Custodial Accounts for Minors

Second, you can retain ownership but name your son as the beneficiary. Instructions for doing this also appear on that Treasury Direct page. You are not making him the owner at this time, but you can gift it to him at a later time, and he will become owner if you die before taking this action. This way you can maintain control beyond age 18 if you wish. This would likely be my choice, although it may be a bit less tax-efficient than creating a custodial account.

Third, you can designate it as a gift, which is the option you mentioned. The bond will be held in a part of your account called the Gift Box. It appears you would do this if you were gifting a bond to your adult son. It may literally be possible to do this now for your 12-year-old, but I don’t think that’s the intent of this arrangement. I’m not clear on what happens if you die with items in your Gift Box, or if you change your mind about gifting them before completing the gift, or if you decide to sell the bond before completing the gift.