This donor, a longtime Hillcrest resident wishes to remain anonymous, so we will call her Wilma Johnson. Wilma discovered something that surprised her about her U.S. Savings Bonds.
Like many of us, Wilma bought savings bonds because they are a good investment in America... and a safe one. They are backed by the federal government... with interest. A smart investment that she hoped someday to pass them on to her heirs.
But Wilma discovered that savings bonds are not the best asset to give to her family. Those who inherit them have taxes to pay - federal income tax and possibly state and federal estate taxes. In certain circumstances the heirs could pay as much as 75% of the value of the bonds in taxes. Why? Because generally we investors defer paying the taxes on the interest earned by the bonds until they are cashed in. So when our heirs inherit them, the bonds are full of unpaid income taxes... that have to be paid.
So Wilma decided she would use other assets to pass on to her family and put those savings bonds to work for her and for Hillcrest.
But if she cashes in the bonds and pays the taxes, her investment will be significantly reduced. Is there any way she can avoid paying the taxes (or offset the taxes) and maintain the full value of her savings bonds?
Yes! Wilma cashed in her savings bonds and funded a charitable gift annuity, which will give her a charitable tax deduction worth more than the taxes she owed on the interest earned from her savings bonds. In fact, she had enough extra charitable deduction for a nice tax savings on April 15. Plus, at 88, Wilma earned an interest rate on the gift annuity nearly three times higher than the Savings Bond... for the rest of her life. This was a rate not available from traditional, fixed-income investments. When Wilma died Hillcrest received what was left in the annuity.
So Wilma was able to cash in her U.S. Savings Bonds, save more taxes than she had to pay, and get an income of more than 11% guaranteed for the rest of her life. And on top of that, for the first five and a half years, 73% of her income was tax free. Wilma truly brought those U.S. Savings Bonds to life and put them to work for her and for Hillcrest.
Do you know that U.S. Savings Bonds don't earn interest forever? If purchased before 1965, they only earn interest for 40 years, and if purchased after 1965, for only 30 years? Your savings bonds may be "dead investments."
If you would like to resurrect your savings bonds, like Wilma Johnson did, call Reggie Ingram, for some ideas (909/392-4320).