Expert: Doug Ingram - 1/18/2010

Question
Hello,
I am interested in making a gift for my grandson for his first birthday.  I am considering the US Treasury I Bond. My main objective is safety with a reasonable return. Do you think this is a good idea?  Also, is it preferable to have it purchased solely under my grandson's ssn or have it as dual ownership with my name and his name on it?  My last question is what happens if you redeem the I bond after 30 years?  For example, it gets stuck in storage and forgotten about and found 50 years later.  Can it still be redeemed?  What are the penalties?  Thank you for any information.

Answer
All the answers to those questions are on:

http://www.treasurydirect.gov/indiv/products/prod_ibonds_glance.htm

It's a great idea for safety and reasonable return.

The dual name is a tax question best handled by an accountant.
To keep things simple, you could just use his name.

There are only penalties for early redemption in the first 5 years.

This is what the site said:

I Bonds are great gifts for all occasions. An I Bond can be sent to you so you can present it personally or it can be sent directly to the person receiving the gift. When you buy the I Bond, ask for a free gift certificate. The word "gift" won't appear on the I Bond.

If you're buying an I Bond for a gift and you don't have the Social Security Number of the person you're buying the bond for, simply use your number. Even though your number will be printed on the bond, you'll incur no tax liability, and it won't count towards your annual purchase limit. The Social Security Number is used for tracking purposes only, such as in cases where the savings bond is lost, stolen, or destroyed.

I don't know of any penalty for redeeming past maturity, but I believe the interest stops at maturity.