Expert: Gina Boykin - 1/2/2008

Question
I am currently purchasing Series EE bonds for my grandchild who is 10 months old.  My plan is for these bonds to be for his education.  My question(s) is:
Am I buying the correct series bonds and also:
Should I put them in his name with his currently 18 year old mother as co owner?
Or should I put them in my name with him as the beneficiary or what do you suggest?

Answer
To qualify for the tax exclusion for EE bonds, you must be 24 years old when you buy the bonds, so you would need to have the bonds in your name.  Also, the grandchild cannot be listed as owner or co owner, but can be the beneficiary.

I would also suggest looking into a 529 plan.  These are state sponsored plans designed to help people save for college.  The money that your account earns grows tax-free, and if you use the plan that your state has (the state where you live) you may get a state tax deduction in the current year for your contributions.

Go to the website below for more information on 529 plans, specifically for grandparents.
http://www.savingforcollege.com/grandparents/

If you decide to purchase EE bonds, you can purchase them on www.treasurydirect.gov.