investing

Cape Town woman can redeem U.S. bonds

Don Taylorq_v2.gifDear Dr. Don,
I am 22 years old and living in Cape Town, South Africa, with my parents. The three of us have dual citizenship of the United States and South Africa.

I have 20 U.S. savings bonds going back to 1986, which were birthday presents from my grandfather in Cleveland. My name is on each bond as the owner, with my mother's name as the alternate owner. The Social Security number on the bond, however, is that of my grandfather.

My grandfather is now very old and not well. I want to find out how I can deal with the ownership of these bonds, should I want to redeem them to pay for my education. I am a student at the University of Cape Town.

I have a Social Security number and a U.S. passport. My parents have a bank account in the U.S., but I have only a South African bank account. I may visit the U.S. in the next year or so.
-- Nicolina Notarized

a_v2.gifDear Nicolina,
The fact that your grandfather used his Social Security number to buy bonds doesn't impact your ownership (or your mother's) of the savings bonds. While I expect that you'll remain concerned about his health, you don't have to worry about it in deciding when to redeem the bonds.

Here's how it's described on the Treasury Direct Web page "Buy EE Savings Bonds":

Identifying Information
Your Social Security number (SSN) is needed to buy a bond. The bond owner will be asked to provide his or her Social Security number for tax purposes when they cash the bond. But, if you're buying a gift and don't know the person's number, you can use your own. Using your SSN doesn't mean you will have a tax liability when the bond is cashed. The bond owner will be asked to provide his or her Social Security Number for tax purposes when they cash the bond.

The U.S. Treasury also has procedures in place to allow you to redeem these bonds either with a bank in your country that is affiliated with a U.S. bank, or by mail. The following is an excerpt from the TreasuryDirect Web page "Redeeming EE/E and I Bonds under Special Circumstances":

If You Reside Outside the United States
If you're a U.S. Citizen, you may be able to redeem bonds in a foreign country at a bank that's incorporated in the United States, the territories or possessions of the U.S., or the Commonwealth of Puerto Rico. Contact the bank first and inquire.

If you reside outside of the United States and you can't find a bank authorized and willing to redeem the bonds and you wish to redeem your savings bonds:

  • Request for payment must be signed in the presence of and be certified by a U.S. diplomatic or consular representative or an officer of a foreign branch of a bank that's incorporated in the U.S., the territories or possessions of the U.S., or the Commonwealth of Puerto Rico, or in the presence of and certified by a notary or other official authorized to administer oaths.
  • If the signature is certified by a notary or other foreign official authorized to administer oaths, a U.S. or diplomatic or consular officer should certify and attest to the official's character and jurisdiction.
  • If you are a U.S. citizen, you must include a statement over your signature stating that you are a U.S. citizen and you must provide your Social Security Number.
  • If you are not a U.S. citizen, you will need to fill out and include IRS Form W-8BEN.

Send the signed and certified bonds to either of these addresses:

Federal Reserve Bank of Pittsburgh
P.O. Box 867
Pittsburgh, PA 15230

Bureau of the Public Debt
P.O. Box 7012
Parkersburg, WV 26106-7012

The decision when to redeem the bonds is up to you. Since you own the bonds in your name, you can't take advantage of the tax break on interest income when using savings bonds purchased after 1989 for qualified education expenses.

I'd suggest downloading the Savings Bond Wizard to keep track of your savings bond portfolio and in deciding whether to redeem the bonds.

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