I-Bond Purchase Over the Limit was Allowed ?

[Bustoff]

I just opened Treasury Direct Accounts for myself and wife.
I opened mine first and purchased $10,000 in I-bonds.
Couple days later, I proceeded to open a TD account for the wife, except this time I submitted the request to purchase her $10,000 of I-bonds on the same day I opened the account.
Couple days pass and I check her TD account to confirm I-bond purchase but nothing showed up. I figured TD must have ignored her purchase request because it didn't have a chance confirm the bank account information. So I submitted another request to buy her $10,000 in I-Bonds.
A day later, my wife gets an e-mail from TD advising her that she's not allowed to purchase $20,000 worth of I-bonds in a single year, and repeated violations may result in an "account closure". I call them and explain it was and honest mistake, that I only meant to purchase $10,000. The guy at TD tells me "not to worry about it". I tell him, "But there's $20,000 of I-bonds in her account now and I dont want the overage to interfere with next years purchase". The TD guy says it won't. He said just keep the $20,000 in her account and next year she will still be allowed to buy another $10,000 of I-bonds.
Is the TD guy right ? Anyone have a similar experience ?

[sscritic]

The federal regulations use the terms "reserve the right" or something similar. They have the right to send the money back to your wife's account, but they don't have to. It's up to them. If you become a serial abuser, they will do something I imagine.

Curious. Your wife gets an email about her abuse, and you call. When you get an email, does she call?

When I get an email, I call. When my wives (when I had them) got emails, they called.

Maybe if you had let your wife make the purchase, she wouldn't have made the mistake you made.

[sscritic]

As I recall previous threads from when the limit was $5,000, several people were able to buy $10,000 worth. I think there was also someone who had the excess returned. But that's all history. If you are really interested, there is a search box. Perhaps you can find those posts.

[Bustoff]

Maybe if you had let your wife make the purchase, she wouldn't have made the mistake you made.

I have found this to be true regarding numerous exploits of mine.

[SSSS]

Treasury Direct is kind of weird in that they don't have a way to prevent excess purchases (even within a single account), but they do have a way to detect excess purchases and send a threatening e-mail (often within minutes). It's unknown exactly how far you can push them before they liquidate all your bonds and ban you, so intentional excess contributions are not recommended.

[sscritic]

§363.52 What is the principal amount of book-entry Series EE and Series I savings bonds that I may acquire in one year?

(d) We reserve the right to take any action we deem necessary to adjust the excess, including the right to remove the excess bonds from your TreasuryDirect account and refund the payment price to your bank account of record using the ACH method of payment.

§363.29 May Treasury close an account, suspend transactions in an account, or refuse to open an account?

We reserve the right to take any of the following actions if, in our sole discretion, we deem the action to be in the best interests of the United States:
(a) Refuse to open an account for any person;
(b) Close any existing account, redeem, sell, or liquidate the securities held in the account, and pay the proceeds to the person entitled;
(c) Suspend transactions with respect to an account or any security held in an account; or
(d) Take any other action with regard to any account that we deem necessary, if not inconsistent with existing law and existing rights.

[HueyLD]

It's unknown exactly how far you can push them before they liquidate all your bonds and ban you, so intentional excess contributions are not recommended.

Don't mess with such a powerful gov. agency!! Do so at your own risk.

[sscritic]

Don't forget this is the Treasury. The Treasury has other tools to deal with you, notably the IRS.

[Browser]

I did this too, the year they capped at the $10K limit. Nothing ever happened. I figured maybe they were giving a little slack that year.

[sometimesinvestor]

I got a warning when I made a similar mistake last year. I then did not make additional purchases and nothing happened

[JimInIllinois]

§363.29 May Treasury close an account, suspend transactions in an account, or refuse to open an account?

We reserve the right to take any of the following actions if, in our sole discretion, we deem the action to be in the best interests of the United States:
(a) Refuse to open an account for any person;
(b) Close any existing account, redeem, sell, or liquidate the securities held in the account, and pay the proceeds to the person entitled;
(c) Suspend transactions with respect to an account or any security held in an account; or
(d) Take any other action with regard to any account that we deem necessary, if not inconsistent with existing law and existing rights.

So savings bonds are potentially both callable (b) and illiquid (c)?

[renter]

Something similar happened to me a few years ago, only it involved two $5k purchases with same SSN (when the electronic limit was $5k). I didn't think my first transaction went through so I reentered it, then got the same slap on the wrist. I wonder, how many times can you cross the line before getting closed out?

[JamesSFO]

This ties into another heated thread, can you buy $10K in your living trust (has your social #) and $10K in your own social #? Etc.

[sscritic]

Buying $10k twice as two different people with the same SSN is not the same as buying $10k twice as the same person with the same SSN. The regs are clear: you are not your trust and your trust is not you. The only issue is if you can have 10 trusts with the same SSN.

Here is one way to think of it. You open an account as yourself. You later open an account for your trust. They are totally separate accounts. Each account can acquire $10k in a calendar year.

[JamesSFO]

Buying $10k twice as two different people with the same SSN is not the same as buying $10k twice as the same person with the same SSN. The regs are clear: you are not your trust and your trust is not you. The only issue is if you can have 10 trusts with the same SSN.

Here is one way to think of it. You open an account as yourself. You later open an account for your trust. They are totally separate accounts. Each account can acquire $10k in a calendar year.

Perhaps; will they bark at me if I then request the personal ibonds to be transferred to the trust account?

[Bustoff]

Don't forget this is the Treasury. The Treasury has other tools to deal with you, notably the IRS.

Just in case someone from Treasury is reading this thread, please be advised that I was not purposefully attempting to violate the rule. It was my first time and it was an honest mistake.

[sscritic]

Yes, they will bark if done in the same year. The limit is on acquisition, not purchase. If you buy $10k and your mother gives you $10k using the gift box, she can buy her own $10k because her gift doesn't count as something that she acquired for her account, but you will be busted if you pick up her gift to you as that puts you well above $10k of acquisitions.

Since I gave the reference earlier, I expected that you would read it (silly me!).

§363.52 What is the principal amount of book-entry Series EE and Series I savings bonds that I may acquire in one year?

The complete* reference for those unwilling to look for it:

(a) The principal amount of book-entry savings bonds that you may acquire in any calendar year is limited to $10,000 for Series EE savings bonds and $10,000 for Series I savings bonds.
(b) Bonds purchased or transferred as gifts will be included in the computation of this limit for the account of the recipient for the year in which the bonds are delivered to the recipient.
(c) Bonds purchased as gifts or in a fiduciary capacity are not included in the computation for the purchaser. Bonds received due to the death of the registered owner are not included in the computation for the recipient.

So if your mom dies and leaves you $10k, it doesn't count against you the same as if she gave them to you as a gift.

* I lie. Since I already quoted (d), I am not doing it again.

I lie again; I didn't answer the question. We won't know until we answer this question: Is a transfer from your trust account to your personal account treated as a gift? Only the regulations will tell you. Find 31 CFR 363 and search for transfer. It pops right up. It turns out if you get a divorce from your trust, you can transfer bonds, but that would still be an acquisition as ownership is passing from one account to another.

[Browser]

I guess another thing that TD could do in reprisal is to vaporize your electronic TD account. Since there are no remedies for recovery, such as with paper bonds, that would take care of offenders for good. I have heard rumors that this is being studied by the US Treasury as a method for taking care of the federal debt. It's all imaginary money anyway, right?

[JamesSFO]

Yes, they will bark if done in the same year. The limit is on acquisition, not purchase. If you buy $10k and your mother gives you $10k using the gift box, she can buy her own $10k because her gift doesn't count as something that she acquired for her account, but you will be busted if you pick up her gift to you as that puts you well above $10k of acquisitions.

... snip ...

I lie again; I didn't answer the question. We won't know until we answer this question: Is a transfer from your trust account to your personal account treated as a gift? Only the regulations will tell you. Find 31 CFR 363 and search for transfer. It pops right up. It turns out if you get a divorce from your trust, you can transfer bonds, but that would still be an acquisition as ownership is passing from one account to another.

Thanks for the specific CFR references.

Observation: it is pretty clear that TD does not (automatically) enforce their own rules.

1) The OP purchased $20K and got a (manual) warning not to repeat, but it strikes me this should just have been blocked just like VG won't let you enter 2-sets of $5.5K 2013 contributions to an IRA.

2) In 2012, I had ~$15K in ibonds in my personal account and transferred them to my trust account then bought $10K of ibonds in the trust account. Though the language of 31 CFR 363.52 specifically refers to "gifts" so maybe this is just a corner case not covered by the rules.

For me personally, holding the bonds titled in the trust's name is a convenience, so if my desired purchase level of ibonds is $20K it seems to be allowed to buy $10K personally and $10K as the trust and not run afoul of the rules.

[Tony]

Buying $10k twice as two different people with the same SSN is not the same as buying $10k twice as the same person with the same SSN. The regs are clear: you are not your trust and your trust is not you. The only issue is if you can have 10 trusts with the same SSN.

Here is one way to think of it. You open an account as yourself. You later open an account for your trust. They are totally separate accounts. Each account can acquire $10k in a calendar year.

This is exactly what I did in 2012. I had an account and purchased the $10k I bonds. I then opened a trust account and purchased $10k I bonds. I got the letter saying it was not permitted. I followed up, since I had read the previously thread here saying that it was permitted, and the response was the same:

Hello,

This would not be possible. You would be permitted to purchase $10,000 under the Entity
TreasuryDirect account trust EIN and then you would each need to purchase $10,000 through
each of your own individual TreasuryDirect accounts. Three separate purchases through three
separate accounts.

As of January 4, 2012, the annual (calendar year) purchase limit for electronic Series EE and I
savings bonds in TreasuryDirect was increased to $10,000, issue price, for each series. The
previous limit was $5,000, issue price, for each series.

The $10,000 limit is applied per social security number (SSN) or taxpayer identification number
(TIN). With the new limit, an investor may purchase a principal amount of $10,000 of each
series for a total of $20,000 each calendar year.

Conversions of paper bonds into TreasuryDirect do not count towards your annual purchase
limit. Bonds you receive as gifts in TreasuryDirect are considered as part of your annual limit in
the year they are received.

For more information on this change, visit
http://www.treasurydirect.gov/indiv/res ... s_0406.htm

sscritic - Do you recommend that I ask to speak to a supervisor?

Thank you,

[sscritic]

§ 363.6 What special terms do I need to know to understand this part?

You or your refers to a TreasuryDirect primary account holder.

Primary account means the account that you establish when you first open your TreasuryDirect account; your primary account is the portal used to open and access all your linked accounts.

Entity means any owner of a TreasuryDirect account that is not an individual.
Individual means a natural person.

§363.10 What is a TreasuryDirect® account?

A TreasuryDirect account is an online account maintained by us solely in your name in which you may hold and conduct transactions in eligible book- entry Treasury securities.
(a) Primary account. The primary account is the account that you establish when initially opening your TreasuryDirect account. The primary account may contain the following Treasury securities:
(1) Individual. A primary account for an individual may contain Treasury securities purchased initially as book-entry securities that are your personal holdings registered in single owner, owner with beneficiary, and primary owner with secondary owner forms of registration; gifts of savings bonds that have not yet been delivered; and converted savings bonds that were trans- ferred from the conversion linked account.
(2) Entities. A primary account for an entity may contain Treasury securities purchased initially as book-entry securities registered in the name of the entity and converted savings bonds in the name of the entity that were transferred from the conversion linked account.

§363.52 What is the principal amount of book-entry Series EE and Series I savings bonds that I may acquire in one year?

(a) The principal amount of book-entry savings bonds that you may acquire in any calendar year is limited to $10,000 for Series EE savings bonds and $10,000 for Series I savings bonds.

Let's trace back:
Who is you that has this limit?
You is a treasurydirect primary account holder.

Who can be a treasurydirect primary account holder?
An individual or an entity.

There is a primary account for an entity. The entity is the owner of the entity account.
There is a primary account for an individual. The individual is the owner of a individual account.

An entity is not a natural person; an individual is. An entity can not be an individual, and an individual can not be an entity.
That makes two separate accounts with two separate owners. There are two separate yous that each have their own limits.

You should ask to talk to your correspondent's supervisor. Ask if he has read 31 CFR 363. I have, and that's the way I read. Now you read it for yourself and tell me how you read. I can be persuaded, but I need someone to read it for me and explain how the words don't mean what I think they mean.

Let me ask you: do you have one account or two?

[Tony]

Let me ask you: do you have one account or two?

Hi ss - I have a TD account; my spouse has a TD account; the two of us have a trust account and it is in my SS # and I am the person authorized to act on that account.

Thank you very much for your quick and thorough reply. I have to go out now, but I'll get back to you tomorrow.

[sscritic]

Let me ask you: do you have one account or two?

Hi ss - I have a TD account; my spouse has a TD account; the two of us have a trust account and it is in my SS # and I am the person authorized to act on that account.

That sounds like three to me; three separate accounts with three separate owners. To clarify: the two of you do not have a trust account; your trust has its own account. You are the account manager for that account.

Another definition:

Entity account manager is the individual who initially opens the TreasuryDirect account for an entity, or his or her replacement; who is authorized by the entity to act alone on its behalf to ...

[Tony]

I'm sorry, sscritic - strike the quote I gave you of the reply from TD. That was actually a reply to an earlier exchange I'd had with TD, asking if I could purchase and then switch I bonds from our regular TD accounts into our Trust Account. I hadn't looked at either of these emails for quite awhile and when I saw this thread and your comment I jumped in without checking. The reply I quoted above actually does seem to say, doesn't it, that I would be able to purchase I Bonds in all three accounts - mine, my spouse and our joint trust account, just as you thought.

But!:
Here is the reply I got when I followed up on TD's warning that I should not have purchased the $10k in our Trust account. (At that time I'd forgotten this much earlier email exchange ):

Hello,
It is my understanding that 10,000 in I Bonds can be purchased with the registration of a trust as well as $10,000 per Social Security number in individual accounts.

Isn't this true?

Thank you for writing.


Treasury.Direct@bpd.treas.gov

to me

Hello,

The limitation is per Social Security Number. Not by registraiton.

Customer Service Specialist

Now that I've re-read the email from TD that I first quoted - above - I realize I should have quoted that in my response to the warning letter from TD. But I'd forgotten all about it.

Thanks again, and I'm wondering if I should edit out all 3 of these emails of mine, which are bound to confuse other readers. Shall I?

[Tony]

Hi again ss:
I wrote my last post without having seen yours.
I'll follow up with TD and report in.
Thank you

[JamesSFO]

Tony looking forward to hearing what you find from Treasury direct!

[Tony]

Tony looking forward to hearing what you find from Treasury direct!

I'm just writing to TD. They usually respond within 24 hours. I'm report back in.

[JamesSFO]

Tony looking forward to hearing what you find from Treasury direct!

I'm just writing to TD. They usually respond within 24 hours. I'm report back in.

I am really curious about this because I would like to buy for my trust if I am allowed so pushing this thread back up.

[sscritic]

I am really curious about this because I would like to buy for my trust if I am allowed so pushing this thread back up.

Don't bump it, just do it.

If you read the thread and sort through the confusion and the between the lines, I think this was an unusual case. My fanciful version is that

he bought bonds in his own account
he bought bonds in his trust account
he brought attention to himself by asking if he could backdoor his trust bonds to his own account. Big No No.
TD said you can't scam us, we aren't that dumb.

Now if he had left out the backdoor scam, they never would have said a thing.

[end fanciful story of TD and the backdoor trust scam]

[JamesSFO]

I am really curious about this because I would like to buy for my trust if I am allowed so pushing this thread back up.

Don't bump it, just do it.

If you read the thread and sort through the confusion and the between the lines, I think this was an unusual case. My fanciful version is that

he bought bonds in his own account
he bought bonds in his trust account
he brought attention to himself by asking if he could backdoor his trust bonds to his own account. Big No No.
TD said you can't scam us, we aren't that dumb.

Now if he had left out the backdoor scam, they never would have said a thing.

[end fanciful story of TD and the backdoor trust scam]

Interesting theory, I'll wait a little bit to see what he comes back with.

[Kevin M]

I have purchased the max limit of I Bonds for my personal and entity (trust) accounts last year and this year; I do not have a separate tax ID for the trust. No problems.

Kevin

[bandoba]

I have purchased the max limit of I Bonds for my personal and entity (trust) accounts last year and this year; I do not have a separate tax ID for the trust. No problems.

Kevin

Pardon my ignorance but I am trying to understand if the trust mentioned in posts above is something like Living Trust or else? And the reason to buy I-Bonds for trust is same as having anything else like real estate etc under the trust or something else? Finally, I assume if the individual owner (or the couple) is deceased then the I-Bonds bought under trust name would be fine but then what happens to I-bonds purchased using individual account?

[Kevin M]

Pardon my ignorance but I am trying to understand if the trust mentioned in posts above is something like Living Trust or else? And the reason to buy I-Bonds for trust is same as having anything else like real estate etc under the trust or something else? Finally, I assume if the individual owner (or the couple) is deceased then the I-Bonds bought under trust name would be fine but then what happens to I-bonds purchased using individual account?

In my case, yes, it's a living trust. My reason to buy I Bonds for my trust is simply to increase the amount I can buy each year, but others may simply want them in their trusts for inheritance purposes.

For I Bonds owned as an individual (not in an entity account), you can designate a co-owner or beneficiary. I designate a beneficiary, therefore on my death the I Bonds will pass to the beneficiary without being included in the probate process. Since I use a trust primarily to avoid probate, this works out well.

Kevin

[sscritic]

Pardon my ignorance but I am trying to understand if the trust mentioned in posts above is something like Living Trust or else? And the reason to buy I-Bonds for trust is same as having anything else like real estate etc under the trust or something else? Finally, I assume if the individual owner (or the couple) is deceased then the I-Bonds bought under trust name would be fine but then what happens to I-bonds purchased using individual account?

If you have a beneficiary, the bonds go to the beneficiary.
If you have a secondary owner, the bonds go to the secondary owner.
With neither a beneficiary nor a secondary owner, they go to your estate.

(iv) Upon the death of the single owner, his or her estate is entitled to the security. In determining entitlement, the law of the decedent’s domicile will be followed.

A will would help at that point.

[bandoba]

Got it. Thanks Kevin & sscritic.

[Tony]

Tony looking forward to hearing what you find from Treasury direct!

Hello JamesSFO and sscritic and others,
Here is the reply from TD. First is TD's response, with part of my original question below. TD didn't understand.

Treasury.Direct@bpd.treas.gov
4:46 PM (1 hour ago)

to me
Hello,

The bonds transferred from the Individual TreasuryDirect accounts will not count toward the entity's annual limit as long as the original purchases were within the annual purchase limit in the senders' accounts. The trust will be shown as in excess due to the transfers but we will permit the excess to stand in the trust.

Joanne
Customer Service Specialist

[THREAD ID:1-4CR2SP]

Sent: 1/31/2013 11:34:11 AM
To: Treasury.Direct@bpd.treas.gov
Subject: Re: Re: TreasuryDirect

Hello, I'm sorry for the delay in responding to your email. I am including an email exchange with another Customer Service Specialist. As you can see he says it is permitted to purchase $10,000 in the Entity TD account and $10,000 through each of my husband's and my other accounts. I had come to the same conclusion after consulting 31 CFR 363: 363.6, 363.10, 363.52 You may wish to start by reading my original email question down below his. Can you clear up the confusion?
....

I won't try any more to get TD to recognize that I was sent the warning letter by mistake. I'm going to assume that you can purchase $10k in individual accounts and also in the entity trust account - as Kevin's experience showed.
It was the question I asked about whether I Bond purchases in in individual accounts in 2013 could be transferred to the entity trust that confused the issue - as sscritic speculated. I made the mistake of including the email exchange with the question about transfers in this final email to TD.

I'll leave it at that.

[sscritic]

Treasury.Direct@bpd.treas.gov
The trust will be shown as in excess due to the transfers but we will permit the excess to stand in the trust.

It was the question I asked about whether I Bond purchases in in individual accounts in 2013 could be transferred to the entity trust that confused the issue - as sscritic speculated.

Now you know better than to ever ask a question. Just do it, as I said to JamesSFO. Note that even if you cheat (once), they will let it stand, as they did for the OP who bought $10k twice. Now as I read you, you didn't even cheat, but just asked an evil question, but no matter. It's all good.

[Tony]

Now you know better than to ever ask a question. Just do it, as I said to JamesSFO. Note that even if you cheat (once), they will let it stand, as they did for the OP who bought $10k twice. Now as I read you, you didn't even cheat, but just asked an evil question, but no matter. It's all good.

You're right; I didn't cheat, it wasn't a scam; I really was just asking!
Thanks again