Savings bonds are popular gifts for young children, and grandparents often see a savings bond as a great way to make a long-term investment in their grandchild's future. In some cases, though, parents will want to use savings bond proceeds while their child is still a minor. In that case, the parent needs to follow U.S. Treasury procedures to cash in the bond.
Requirements for cashing in a child's savings bond
The Treasury differentiates between paper savings bonds and bonds that are in electronic form. For paper bonds, the Treasury allows parents to redeem a child's bonds if two conditions are met. First, the child must be too young to sign the request for payment. Second, the child must live with the parent, or the parent must have legal custody of the child.
To redeem the bond, the Treasury advises that you write specific language on the back of the bond and sign it as parent on behalf of the child. The language is as follows:
"I certify that I am the parent of [child's name]. [Child's name] resides with me / I have been granted legal custody of [child's name]. [She/he] is __ years old and is not of sufficient understanding to make this request."
If the parent takes the bond to a local financial institution that is willing to redeem it for the parent, then the institution can make payment directly to the parent. If the local financial institution won't redeem the bond, then the parent must have the signature guaranteed or certified and then must send the bond to the Treasury Retail Securities Site. You can get more details at the Treasury website.
For electronic bonds held in a TreasuryDirect account, different rules apply. Typically, bonds held for a minor are held in a special minor's account over which the parent will have authority. The TreasuryDirect system will allow you to view the child's bonds and select redemption options for cashing bonds in either in part or in full.
With a minor's account, most of the administrative work is done at the beginning when you first set up the account. Therefore, as long as you've set things up correctly, it can be a lot easier for a parent to redeem a child's savings bond electronically. However, any changes can complicate the process and require multiple actions to get your bonds cashed in.
Savings bonds can be a great introduction to long-term saving. But if you need to cash them in to pay for the child's needs, then parents can generally find a way to get the job done with a little legwork.
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