One limitation of buying I Bonds is the annual purchase limit. Each person can buy a maximum of $10,000 per calendar year as the primary owner. If you see I Bonds as an investment, it’s true you can’t dump $500,000 into I Bonds in one shot. However, if you see I Bonds as another account, the $10,000/person limit is higher than the annual contribution limit for an IRA. You never hear people say you shouldn’t bother contributing to an IRA because the limit is only $6,000 or $7,000 per year. People go to great lengths to contribute to their IRA with a backdoor Roth.
In addition, if you have a trust, you can buy another $10,000 per year under the name of the trust. A lawyer created a revocable living trust for us back in 2018 (see Will and Trust Through Employer Legal Plan). It was surprisingly easy when I opened an account for the trust at TreasuryDirect last month. It took only 15 minutes to open a new trust account and buy another $10,000 of I Bonds.
Registration Name
TreasuryDirect has instructions for opening an entity account. A trust account is one type of entity accounts (the other types include corporation, LLC, partnership, and sole proprietorship). The instructions look complicated but it’s not that bad if you read closely. The most tricky part is the name for the trust account. For a revocable living trust, they want the registration to include both the trustee and the grantor even if the names are the same.
My wife and I have a joint trust. We are both trustees and grantors. So the name of our registration becomes:
Person A or Person B, Trustees, [Name of the Trust] U/A with Person A and Person B dated [Month Date, Year]
The instructions include a list of approved abbreviations. “U/A” stands of Under Agreement. They allow 150 characters in the registration. Although the registration looks long and redundant, it fits within 150 characters.
Tax ID
A revocable living trust typically uses the grantor’s Social Security Number as its Tax ID. The trust account at TreasuryDirect can still use the grantor’s Social Security Number even though the grantor also has a personal account with TreasuryDirect under the same Social Security Number.
Email Address
The trustee acts as the manager of the trust account. TreasuryDirect wants an email address for sending one-time passwords and notifications. You can use the same email address if you also have a personal account at TreasuryDirect.
Bank Account
The new trust account needs a linked bank account. The bank account doesn’t have to be under the name of the trust. It can be the same personal bank account linked to the grantor’s personal account at TreasuryDirect.
Between the personal account and the trust account, the Tax ID, the email address, and the linked bank account can all be the same. The account number and the account type are different.
TreasuryDirect doesn’t do any random deposits to verify the bank account. You can enter an order to buy as soon as you create the trust account. Make sure you give the correct bank account. If the debit bounces, your account will be locked and it’ll take effort to unlock it.
Separate Trusts
We have one joint trust because we live in a community property state. It’s not uncommon for a couple to have separate trusts. If you have two trusts, you can open a separate account for each trust and buy another $10,000 of I Bonds every year in each account.
Create Trust by Software
If you don’t have a trust and you don’t otherwise need one, you can still create a trust just to buy more I Bonds. It may not be worth it if you have to go to a lawyer but if you make it really simple, you can do it with software. Quicken Willmaker & Trust 2021 by Nolo Press sells for only $39 on Amazon. Many public libraries carry this book-and-software combo or a previous edition. You can also find free living trust templates online, although I trust Nolo Press more.
Keep Them Separate
A trust can’t be the beneficiary or the second owner on I Bonds. The beneficiary or the second owner has to be a person (see the previous post I Bonds Beneficiary vs Second Owner in TreasuryDirect). Although there’s a way to transfer existing bonds held in a personal account to a trust account, which can’t be done online anyway, TreasuryDirect doesn’t like it. So if you’re buying in both accounts, you should just keep your personal account and your trust account separate. Designate a second owner or a beneficiary on the bonds in your personal account and grant the necessary rights. See the previous post How To Grant Transact Right on I Bonds to the Second Owner.
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Steve Johnson says
As always, I enjoyed reading your article. My understanding is that you and your wife are the grantors of your revocable living trust. To purchase more than the $10,000 annual limit, you have established at least two Treasury Direct accounts; one in the name of the trust, and a personal accounts in your name. Can the trust be designated as the beneficiary of the personal account? If so, wouldn’t that be the best way to ensure that the proceeds are distributed to your heirs without the potential bother of probate?
Harry Sit says
The trust can’t be designated as the beneficiary. The beneficiary has to be a person.
Mary F says
I read this as saying you couldn’t do this since my trust has the same SSN as I do. You have actually done this and it works?
https://www.treasurydirect.gov/indiv/research/faq/annualpurchaselimitchangeqa.htm
What is the annual purchase limit for U.S. Savings Bonds?
Effective January 4, 2012, the annual (calendar year) purchase limit applying to electronic Series EE and Series I savings bonds is $10,000 for each series. The limit is applied per Social Security Number (SSN) or Taxpayer Identification Number (TIN). For paper Series I Savings Bonds purchased through IRS tax refunds, the purchase limit is $5,000 per SSN.
Harry Sit says
Yes it works because the personal account and the trust account are of different account types. That Q&A must be talking about personal accounts only or accounts of the same type.
Jonathan says
I think it is tracked per SSN … so unless the revocable living trust has a distinct TIN, then it won’t work.
Kevin says
I had wondered if I could have 2 accounts using my trust and actually wrote Treasury Direct last week. Their reply was a bit legalese but matched this blog post. So my wife and I could have 4 accounts beteen us. 2 trust accounts (with each of us as a lead) and 2 individual accounts. I just need the $40k to max them out!
Burt Peterson says
Kevin, is your Trust a single Joint Living Trust with you and spouse as Trustees or do you have two separate trusts? Thanks.
Kevin says
It is a single trust. But both of us have full authority to buy, sell, etc. So my understanding is that I could be lead on one account and she could be lead on other. Each would have separate lead and SSN. Is this incorrect? It doesn’t matter much to us (we are not positioned to add $40k per year) but could matter to others.
Harry Sit says
Our joint trust has two trustees but only one Tax ID. The Tax ID is designated in the trust document. It doesn’t matter which trustee acts on behalf of the trust. The trust’s Tax ID is still the same.
Burt Peterson says
Our Trust is a Joint Living Trust and is revocable, hence is considered a Grantor trust; as such, it does not have its own TIN but using the SSN of a Grantor. I’m wondering whether we can establish two separate Trust-type accounts at TD by each of us creating one using our individual SSNs. That is, it seems, what Kevin was initially referring to here. I have not tried this at TD, but it seems it should work since each Trust-type of account would have a different TIN (SSN).
Steve says
Burt, In your recent post you said that your revocable living trust does not have its own TIN but uses the SSN of a grantor of the trust. Like most revocable living trusts, my trust is similar to yours. My wife and I are grantors, but my trust documents specify that my SSN is to be used as its tax ID number. There is no allowance for the use of my wife’s SSN when transacting trust business. Since our trust uses my SSN, all taxable income that flows through the trust to me and my wife must be reported each year on Form 1040 under my SSN. All entities with federal tax filing requirements use just one TIN. Trusts are no different, and only the identification number specified in the trust documents can be used for trust business. Using someone else’s TIN for the trust violates the terms of the trust. Depending on the circumstances, such an act could be seen as fraudulent.
Kevin says
I think Burt’s reply is better than mine – I think we’d be limited to 3 accounts (2 individual and 1 trust). Now I just need $30k to fund them each year.
Burt says
I have reviewed my Trust document and it does not specify an SSN to be used as the trust’s TIN. Our attorney’s instructions state “You should give your own social security numbers when opening accounts in the name of the trust.” I am inquiring of him as to what that means for the TD registration and the proper use of our SSNs in this regard. Our trust documents expressly permit both community and separate property to be transferred “to the Trustee” and that such property is to be segregated and not commingled. Also that the Trustee may establish separate trusts ‘hereunder’ for each type of property. So, one trust document, but three revocable trusts – 1) Community property, 2) my separate property and 3) my wife’s separate property, each with distinct names. Perhaps that makes a difference.
Harry Sit says
I agree with Steve, although I’m not a lawyer. Each entity has only one tax ID. You can choose to use which grantor’s SSN as the trust’s tax ID, but the same entity doesn’t get two tax IDs simultaneously. The trustees may establish separate trusts “hereunder” for different types of properties but when did they actually do that? Where is the document that established the separate trust? You can’t create a separate entity only in your head. It’s OK to have another trust using a different grantor’s SSN as its tax ID but it should be documented. Either exercise the power in the existing joint trust to create another trust under it or create a whole separate trust using software. Give it a different name and have proper notarized signatures and all that.
erik says
this is interesting. I am just wondering if I have 10x$10K series EE bonds in my personal account with treasurydirect, can move them to a newly created account at treasurydirect that pertains to my revocable trust?
Harry Sit says
See the new paragraph at the end. It applies to EE bonds as well. You should keep them separate if you’re buying in both accounts.
Steve says
Since the revocable living trust can’t be designated as the beneficiary of an individually owned Treasury Direct account, what is the easiest way to ensure that the I Bond proceeds go to the owner’s heirs as specified in the revocable living trust when the individual I Bond owner dies? Shouldn’t the linked bank account be one that is in the name of the trust? Wouldn’t that ensure that the trust would be the recipient of the bond proceeds thereby eliminating the risk of probate?
Erik says
My question is related to Steve. I want my trust to be the beneficiary of my personal Treasury direct account (but I can’t your comment harry). Is there a work around to this problem? Can you sweep /redesignante to the newly established account pertaining to my trust that has no seed money yet ( I bond or ee bond)?
Harry Sit says
If you’re going to abandon the personal account and only use the trust account in the future, you can transfer the existing bonds from the personal account to the empty trust account. Fill out FS Form 5511 and sign in front of a certifying officer at a financial institution. Read the form instructions on taxes. When you’re considered as in control of the trust, the transfer is not taxable. They just don’t like it when you buy in both accounts and still transfer from your personal account to the trust. Either keep two accounts separate and buy in both or transfer and only use the trust account afterward.
Erik says
Meaning no taxable event.
Steve says
Harry, could you reply to my comment (#5) concerning the probate protection of linking a trust bank account to the personal Treasury Direct account rather than linking a personal bank account to it? This would keep the eventual cash payout of the I Bond under the umbrella of the trust. Do you agree?
Harry Sit says
During your lifetime, while you’re still mentally compentent, you can certainly redeem the bonds and send the proceeds to a bank account under the name of a trust. That’s just funding the trust with personal assets, as you’re allowed to do with any other assets. If you granted transact rights to a second owner, the second owner can do the same on your behalf.
After your death though, I’m not sure anyone can legally use your password to redeem your bonds. Any power of attorney ends with your death. If you don’t have a second owner or beneficiary on the bonds in your personal account, the bonds belong to your estate and your executor has to establish him- or herself through probate. If you do have a second owner or beneficiary on the bonds, those assets belong to them now and they can’t fund your trust when they’re not a grantor.
So to me, it still comes down to the same two choices:
A) Keep the personal account and add a second owner or beneficiary on the bonds. Grant the necessary rights. Take this distribution outside the trust into consideration in how you allocate the trust assets.
Or
B) Transfer everything into the trust account and abandon the personal account.
Eric L. says
Harry, enjoyed your article very much. I am a sole proprietor and I learned, after reading your article and following the links, TD allows an entity account for a sole proprietorship. It appears that I could open another account for the business and potentially purchase another $10k per year. Does that sound correct to you, and if the business is dissolved, I assume there would be some kind of form to transfer them or redeem them? Do you have any tips for this situation?
Harry Sit says
Yes, a sole proprietor account is another type of entity account. As the business owner, you should dispose of the business’s assets before dissolving the business. You can either sell the assets for cash and distribute the cash or distribute the assets in-kind. If you don’t want to sell the bonds in the sole proprietor account, use FS Form 5511 to transfer them to your personal account.
Eric L. says
Thank you Harry! Sounds like if the entity was dissolved or the bonds were transferred, it would be a taxable event. Good to know — I appreciate your answer! I will definitely be putting some of the things I’ve learned in this article into practice.
Mark Heyerdahl says
I want to add a beneficiary to my bonds. The ManageDirect >> Registration List >> Add page shows inputs for both a “First-Named Registrant” and “Second-Named Registrant (Required for Primary Owner and Beneficiary registrations only.)”. Selecting the Beneficiary radio button requires filling out both Registrant inputs. I just want to register one beneficiary, not two…?
Harry Sit says
When you add a beneficiary, you will be the first registrant and the beneficiary will be the second registrant. So just put your information in the first registrant inputs and your beneficiary’s information in the second registrant inputs.