How to give Bonds as a Gift

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  • Only the US TreasuryDirect website can you purchase US savings bonds.
  • Both the gift receiver and buyer must have a TreasuryDirect Account. The purchase limit is $10,000.
  • You cannot send electronic bonds as gifts. There are no restrictions on how many recipients you can gift and how often you can gift them.

If you are looking for an asset that will appreciate over time, gifting savings bonds could be a great choice.

Contrary to stocks, these debt instruments tax the interest earned and count it as income. However they have high potential for earning interest and can be used even to pay for higher education.

Below, we examine how gifting savings bond works and how it differs from other contributions to charities or individuals. 

Who is eligible to receive gift bonds?

Anyone who is able to provide a TreasuryDirectAlexander Voigt founder and CEO of TreasuryDirect says that savings bonds can be gifted to anyone who has an account with TreasuryDirect.

To buy an electronic savings bond, you will need $25. You can also buy one for as high as $10,000. Voigt states that you can gift bonds to anyone under 18 or to their state’s minimum age. However, parents must establish a minor-linked account with their TreasuryDirect account if they want to gift them.

Also, you can only give bonds electronically. 

How does gifting bonds work?

Investors cannot currently purchase EE or I savings bond directly from the US government. To do so, they will need a TreasuryDirect account.

Voigt explains that you must first buy the gift savings bonds on your behalf with your bank account and keep it for at least five business days before you can give them as gifts. Voigt adds that while the gift recipient’s name and social security number are required during the purchase process, but it is important to click on the box that states “This is a Gift” when purchasing the bonds.

If you purchase I savings bonds within the same time frame as the EE savings bond, they will have 6.89% interest rates. An additional difference is that the interest rate on an I savings bond changes every six month. These bonds can also be printed or electronic. You can only purchase them in paper if you have a tax refund. 

How to give bonds to charity

Gifting bonds isn’t limited to individuals. You can also gift bonds for charities. However, as with individuals, the charity must have a TreasuryDirect Account in order to gift the bond. The platform offers accounts to the following types entities:

  • Limited liability companies, or LLCs,
  • Corporations
  • Partnerships
  • Sole proprietorships
  • Trusts
  • Professional limited liability companies (PLLCs),
  • Living estates
  • Estates of the deceased

You can transfer bonds as long as the charity you wish to gift the bond to is legally registered as one of these entities. In order to complete the transfer, you will need information such as the charity’s name and account information, as well the details of your bond.

Voigt explains that the buyer of a gift savings bond can view the bonds generally issued in the ‘Gift Box,’ within one business day. Voigt adds that the buyer of the gift savings bonds must go into their Gift Box and select the bond they want to deliver, then enter the recipient’s TreasuryDirect number and submit the request.

Gifting bonds can provide tax benefits.

The government taxes primarily the interest savings bonds earn. This results in federal income taxes. gift taxes, excise and federal taxes, federal estate taxes, state estate or inheritance taxes.

TreasuryDirect provides an exit route to avoid paying taxes on the interest on your bond. If you use the interest to fund higher education expenses, you can avoid taxes. This perk has a downside. It is only available to people who were at least 24 years old when the bond was issued. This means that taxes cannot be offset for the benefit of a child’s education if the bond is not registered in your name (and that you were at least 24 when you purchased it).

What other types of investments can you gift?

You can give anything, even traditional investments such as stocks and bonds. mutual fundsAlternative assets, such as precious metals and tangible items, are not allowed. If you transfer investments to individuals, you will still need to pay attention to the 2022 $16,000 IRS Gift Allowance. (The allowance will increase to $17,000 in 2023.

There is no limit to how much savings bonds you can have, but there are some restrictions. It is There is a limit on the amount you can purchase each year. For example, the US government allows you each year to buy a maximum $10,000 in electronic EE saving bonds, $10,000 I bonds, and $5,000 paper I bonds.

You can also gift bonds that don’t count towards your TreasuryDirect limit, but they will count towards the recipient’s limit. This means that you can buy as many bonds as you like for any person or entity with an account. However, you must adhere to the $25 minimum transaction limit and $10,000 maximum transaction limit. 

The bottom line

To gift stock to an individual or charity, you will need a TreasuryDirect account. You will also need information such as the name of the recipient. social securitynumber and TreasuryDirect account numbers. A minor-linked account must be set up by anyone who plans to gift a child a savings bond.

Taxes can be avoided if you use the bonds to finance education costs. However, this is only possible if you are at least 24 years of age.

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