IBond maximizing for a married couple

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Goldilocks
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IBond maximizing for a married couple

Post by Goldilocks »

My husband and I have decided to start transferring almost $100k in emergency funds from no penalty CDs with Ally Bank to IBonds at the US Treasury Dept (TD). We are both trustees of a revocable living trust (RLT) that does not have a tax ID# and have some questions.

1)With 2 SS#s can we buy more than $25k in IBonds a year ($10k/SS# electronic + $5k/year paper with a married filing jointly tax return)?

2)What is the optimal way for a married couple to open new account(s)? Would it include a two owner account with both our SS#s? If so, would can we buy 20$ in electronic IBonds in that one account and would that option have our beneficiaries in probate because we can't name an RLT as a beneficiary--a beneficiary can't be an entity?

3)Or should we open separate accounts in combinations of either One Owner or One Owner beneficiary options? If so, what is the optimal combo and would we be risking probate on deaths because again--our RLT cannot be a beneficiary?
Last edited by Goldilocks on Fri Sep 18, 2020 5:16 pm, edited 5 times in total.
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Mel Lindauer
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Re: Ibond maximizing for a married couple

Post by Mel Lindauer »

Goldilocks wrote: Fri Sep 18, 2020 1:56 pm My husband and I have decided to start transferring our $100k emergency funds from no penalty CDs with Ally Bank to I Bonds at the US Treasury Dept.

We are both trustees of a revocable living trust (RLT) that does not have a tax ID# and benefits our children. After reading multiple postings on this Forum and searching through the Treasury Direct site. It seems that the most practical way within the rules to max out our annual IBond purchases is to:
1) Open our primary Entity account with our RLT and my SS# to buy the max of $10k in electronic IBonds each year. This primary account would be linked to our Ally Savings Account.
2) Open a 2nd account with his SS#--him as owner me as beneficiary--also linked to our Ally Account, buy another $10K of IBonds and transfer all to our primary account per 1) above.
3) Buy $5k of paper bonds each year through our married filing jointly tax return and transfer it to primary account 1)

Thus we could collectively buy $25k of IBonds each year and hold them in one account under our RLT, and we have more than $25k of funds in Ally CD's beyond our emergency amount to cover the TD's 1 year waiting time for new IBond access.

This seems like the most straight forward approach to max IBonds for a typical married couple with RLT--what do you think?
Actually you can purchase up to $35,000 per couple each year.
1. $10,000 spouse 1
2. $10,000 spouse 2
3. $10,000 trust
4. $5,000 via tax refund

Here's a Treasury Direct link that talks about trusts. You'll see that using your SS# for the trust is OK. You are an individual and the Trust is an entity.

https://www.treasurydirect.gov/forms/savpdp0049.pdf
Best Regards - Mel | | Semper Fi
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Goldilocks
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Re: Ibond maximizing for a married couple

Post by Goldilocks »

Mel Lindauer wrote: Fri Sep 18, 2020 2:57 pm
Actually you can purchase up to $35,000 per couple each year.
1. $10,000 spouse 1
2. $10,000 spouse 2
3. $10,000 trust
4. $5,000 via tax refund

Here's a Treasury Direct link that talks about trusts. You'll see that using your SS# for the trust is OK. You are an individual and the Trust is an entity.

https://www.treasurydirect.gov/forms/savpdp0049.pdf
Maxing I Bonds to $35k a year is even better! Will we need to, and can we through the TD site, open three separate accounts with at least two of them sharing my SS#?

With all the progress from Mel Lindauer's enlightening reply I shortened my OP. Any forum replies to my new estate/anti-probate questions will be helpful too. Thank you, Bogleheads.
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gcmesa
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Re: IBond maximizing for a married couple

Post by gcmesa »

Hello,

My wife and I keep our rainy day funds in I Bonds too, but I made a happy accident a few years ago. After a pretty hectic week, I accedentaly purchased $50K in I Bonds in one night under both of our SSNs. When I came to my senses the next day, I realized that I purchased $30K too much for our combined yearly limit. So I e-mailed the Treasury Direct people to ask for forgiveness and mercy to allow my to clean up this mess without burning my house down :)

While waiting for TD's response, my boss/financial mentor bet that [OT comment removed by admin LadyGeek] Well, this is their response below. What you do with it, is up to you.


Hello,

TreasuryDirect accounts are monitored for excess purchases. A report is generated regarding this issue and the account is reviewed. If, after review, it is determined that the purchase was a first offense the purchase may be permitted to stand. If it is determined that repeat excess purchases have been issued, this would result in a refund of the excess amount. There is no action necessary on your part at this time. If a refund is necessary you will be contacted at that time.

Treasury Services
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HueyLD
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Re: IBond maximizing for a married couple

Post by HueyLD »

Goldilocks wrote: Fri Sep 18, 2020 1:56 pm
2)What is the optimal way for a married couple to open new account(s)? Would it include a two owner account with both our SS#s? If so, would can we buy 20$ in electronic IBonds in that one account and would that option have our beneficiaries in probate because we can't name an RLT as a beneficiary--a beneficiary can't be an entity?

3)Or should we open separate accounts in combinations of either One Owner or One Owner beneficiary options? If so, what is the optimal combo and would we be risking probate on deaths because again--our RLT cannot be a beneficiary?
When you open a TD account as an individual, you will be the primary owner. There is not a joint ownership option for a TD account. However, the primary owner can designate a “secondary owner” or a “beneficiary“ for the account. It is OR, not AND. In other words, you can have either a secondary owner or a beneficiary but not both.

The secondary owner is basically a beneficiary without ownership rights. The primary owner can allow the secondary owner certain transaction rights, but that is not the same as ownership rights.


Either way, the secondary owner or the beneficiary can claim the bond after the primary owner dies without going thru probate. But they will have to go thru all required steps just like other accounts.

For additional guidance on TD ownership structure, see this link https://www.law.cornell.edu/cfr/text/31/363.20
SnowBog
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Re: Ibond maximizing for a married couple

Post by SnowBog »

Mel Lindauer wrote: Fri Sep 18, 2020 2:57 pm Actually you can purchase up to $35,000 per couple each year.
1. $10,000 spouse 1
2. $10,000 spouse 2
3. $10,000 trust
4. $5,000 via tax refund
Is $35k a specific limit?

If both have their own living trust, couldn't they do $45k/year?

Likewise, if they also have a joint trust as well, wouldn't that let them buy $55k/year?

Isn't it basically an extra $10k/year per unique trust?
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Re: Ibond maximizing for a married couple

Post by Mel Lindauer »

SnowBog wrote: Sat Sep 19, 2020 9:05 pm
Mel Lindauer wrote: Fri Sep 18, 2020 2:57 pm Actually you can purchase up to $35,000 per couple each year.
1. $10,000 spouse 1
2. $10,000 spouse 2
3. $10,000 trust
4. $5,000 via tax refund
Is $35k a specific limit?

If both have their own living trust, couldn't they do $45k/year?

Likewise, if they also have a joint trust as well, wouldn't that let them buy $55k/year?

Isn't it basically an extra $10k/year per unique trust?
Yes, each trust is allowed 10K, but she only asked how much she could purchase with the one trust that they own.
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HueyLD
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Re: Ibond maximizing for a married couple

Post by HueyLD »

SnowBog wrote: Sat Sep 19, 2020 9:05 pm Isn't it basically an extra $10k/year per unique trust?
Yes, pay attention to the word “unique.”

A trust account is an entity account and a unique and valid TIN must be furnished for each trust when opening an entity account on TD.

So, if the three trusts you so mentioned have three different TINs, yes you can purchase additional $30k a year per savings bond series.

However, the cost of setting up each additional trust may outweigh the benefit of allowable additional purchase.
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Re: Ibond maximizing for a married couple

Post by SnowBog »

HueyLD wrote: Sun Sep 20, 2020 6:13 am
SnowBog wrote: Sat Sep 19, 2020 9:05 pm Isn't it basically an extra $10k/year per unique trust?
Yes, pay attention to the word “unique.”

A trust account is an entity account and a unique and valid TIN must be furnished for each trust when opening an entity account on TD.

So, if the three trusts you so mentioned have three different TINs, yes you can purchase additional $30k a year per savings bond series.

However, the cost of setting up each additional trust may outweigh the benefit of allowable additional purchase.
I don't believe a unique TIN is required. I was able to setup a TD account for a living trust (a unique entity) using my TIN (SSN). I haven't purchased anything yet under it, but no issues creating it.
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HueyLD
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Re: IBond maximizing for a married couple

Post by HueyLD »

A unique TIN is required within each type of account. There are two types of accounts: individual and entity.

For example, your individual account can have your SSN as the TIN and your trust can also use your SSN as the TIN because a trust account is an entity account while an account under your name is an individual account.

However, you cannot have two individual accounts under the same TIN, nor can you have two trust accounts under the same TIN.

The rules are spelled out on TD websites and related CFRs.
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Mel Lindauer
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Re: IBond maximizing for a married couple

Post by Mel Lindauer »

HueyLD wrote: Sun Sep 20, 2020 2:09 pm A unique TIN is required within each type of account. There are two types of accounts: individual and entity.

For example, your individual account can have your SSN as the TIN and your trust can also use your SSN as the TIN because a trust account is an entity account while an account under your name is an individual account.

However, you cannot have two individual accounts under the same TIN, nor can you have two trust accounts under the same TIN.

The rules are spelled out on TD websites and related CFRs.
Which means a couple can possibly have four accounts using their two TINs: two individual and two trusts.
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JBTX
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Re: IBond maximizing for a married couple

Post by JBTX »

gcmesa wrote: Sat Sep 19, 2020 3:13 am Hello,

My wife and I keep our rainy day funds in I Bonds too, but I made a happy accident a few years ago. After a pretty hectic week, I accedentaly purchased $50K in I Bonds in one night under both of our SSNs. When I came to my senses the next day, I realized that I purchased $30K too much for our combined yearly limit. So I e-mailed the Treasury Direct people to ask for forgiveness and mercy to allow my to clean up this mess without burning my house down :)

While waiting for TD's response, my boss/financial mentor bet that [OT comment removed by admin LadyGeek] Well, this is their response below. What you do with it, is up to you.


Hello,

TreasuryDirect accounts are monitored for excess purchases. A report is generated regarding this issue and the account is reviewed. If, after review, it is determined that the purchase was a first offense the purchase may be permitted to stand. If it is determined that repeat excess purchases have been issued, this would result in a refund of the excess amount. There is no action necessary on your part at this time. If a refund is necessary you will be contacted at that time.

Treasury Services
Wow. That is really interesting. Kind of a roll the dice and ask for forgiveness later scenario.
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Re: Ibond maximizing for a married couple

Post by JBTX »

Mel Lindauer wrote: Fri Sep 18, 2020 2:57 pm
Goldilocks wrote: Fri Sep 18, 2020 1:56 pm My husband and I have decided to start transferring our $100k emergency funds from no penalty CDs with Ally Bank to I Bonds at the US Treasury Dept.

We are both trustees of a revocable living trust (RLT) that does not have a tax ID# and benefits our children. After reading multiple postings on this Forum and searching through the Treasury Direct site. It seems that the most practical way within the rules to max out our annual IBond purchases is to:
1) Open our primary Entity account with our RLT and my SS# to buy the max of $10k in electronic IBonds each year. This primary account would be linked to our Ally Savings Account.
2) Open a 2nd account with his SS#--him as owner me as beneficiary--also linked to our Ally Account, buy another $10K of IBonds and transfer all to our primary account per 1) above.
3) Buy $5k of paper bonds each year through our married filing jointly tax return and transfer it to primary account 1)

Thus we could collectively buy $25k of IBonds each year and hold them in one account under our RLT, and we have more than $25k of funds in Ally CD's beyond our emergency amount to cover the TD's 1 year waiting time for new IBond access.

This seems like the most straight forward approach to max IBonds for a typical married couple with RLT--what do you think?
Actually you can purchase up to $35,000 per couple each year.
1. $10,000 spouse 1
2. $10,000 spouse 2
3. $10,000 trust
4. $5,000 via tax refund

Here's a Treasury Direct link that talks about trusts. You'll see that using your SS# for the trust is OK. You are an individual and the Trust is an entity.

https://www.treasurydirect.gov/forms/savpdp0049.pdf
Thanks for helpful link.

Two questions

The and / or thing has me a bit concerned. Our trust is titled jbtx and DW trust.... If I'm reading this right, in theory we are supposed to do everything together. While Td is obviously not watching us on our computers, I'm curious what the implications are if either party makes transactions on their own.

What if you close RLC and/or open new one under different title? I assume you can re title it, just like you can going the other direction individual >>trust. But it doesn't specifically address this.
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Re: Ibond maximizing for a married couple

Post by Goldilocks »

Mel Lindauer wrote: Fri Sep 18, 2020 2:57 pm
Actually you can purchase up to $35,000 per couple each year.
1. $10,000 spouse 1
2. $10,000 spouse 2
3. $10,000 trust
4. $5,000 via tax refund

Here's a Treasury Direct link that talks about trusts. You'll see that using your SS# for the trust is OK. You are an individual and the Trust is an entity.

https://www.treasurydirect.gov/forms/savpdp0049.pdf
Can we transfer the value of a paper I Bonds accumulated in $5000 annual increments per year from tax refunds (item 4.) to an electronic trust account account(3.)?
I'm no model lady. A model's just an imitation of the real thing.― Mae West
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HueyLD
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Re: Ibond maximizing for a married couple

Post by HueyLD »

Goldilocks wrote: Tue Sep 22, 2020 9:30 am
Mel Lindauer wrote: Fri Sep 18, 2020 2:57 pm
Actually you can purchase up to $35,000 per couple each year.
1. $10,000 spouse 1
2. $10,000 spouse 2
3. $10,000 trust
4. $5,000 via tax refund

Here's a Treasury Direct link that talks about trusts. You'll see that using your SS# for the trust is OK. You are an individual and the Trust is an entity.

https://www.treasurydirect.gov/forms/savpdp0049.pdf
Can we transfer the value of a paper I Bonds accumulated in $5000 annual increments per year from tax refunds (item 4.) to an electronic trust account account(3.)?
Take a good look at form 8888 and its instructions. You will get “paper” bonds issued to an individual of your choice. And of course you can convert the paper to electronic and transfer bonds from individual account to your trust account.

https://www.irs.gov/pub/irs-pdf/f8888.pdf
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