Dear Dr. Don, This is a bad news, good news situation that I’m asking about. I just received several Series EE and Series I savings bonds. I am the so-called payable-on-death beneficiary on the bonds. My mom, who purchased the bonds, recently passed away. Can I cash them in and use them for my daughter’s college fund without getting hit with a big tax bill? I think my mom would be happy to see the money being put to such good use.
Thanks,
— Sherri Savings
iStock.com/DragonImages
Dear Sherri,
Put another way, you want to know, as the payable-on-death beneficiary, if you can use the federal education tax exclusion to cash in the savings bonds to pay for your daughter’s college costs. The beneficiary angle puts an interesting wrinkle on the question, so I worked with the customer service specialists at the U.S. Treasury Department to find you the answer.
The reply was: “Since she is not the original, first-named owner on the bond, it does not qualify for educational purposes. It would still not qualify if she were to reissue the bond as well. It must be originally purchased with the intention of educational use.”
Get more news, money-saving tips and expert advice by signing up for a free Bankrate newsletter.
Ask the adviser
To ask a question of Dr. Don, go to the “Ask the Experts” page and select one of these topics: “Financing a home,” “Saving & Investing” or “Money.” Read more Dr. Don columns for additional personal finance advice.
Bankrate’s content, including the guidance of its advice-and-expert columns and this website, is intended only to assist you with financial decisions. The content is broad in scope and does not consider your personal financial situation. Bankrate recommends that you seek the advice of advisers who are fully aware of your individual circumstances before making any final decisions or implementing any financial strategy. Please remember that your use of this website is governed by Bankrate’s Terms of Use.
