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. See How to Buy I Bonds: Soup to Nuts.
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. 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.
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 for Under Agreement. They allow 150 characters in the registration. Although the registration looks long and redundant, it fits within 150 characters.
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.
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.
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.
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. See Create a Simple Revocable Living Trust with Software for I Bonds.
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.
Say No To Management Fees
If you are paying an advisor a percentage of your assets, you are paying 5-10x too much. Learn how to find an independent advisor, pay for advice, and only the advice.