Cash or Don't cash Savings Bonds

Paying for College
1

<p>Hi</p>

<p>First post here. Daughter is a senior this year and will be attending college next year. We found out that she has around $5800 in savings bonds that are in her name and ss number. Fafsa wise would it make sense to cash them out before the end of the year?</p>

<p>If we cash the bonds what's best to do with the money. Pay off debt or place in our savings?</p>

<p>Thanks in advance!</p>

<p>Jeff</p>

2

<p>FAFSA is looking at your assets from the date you file and your income from the previous year (2012). </p>

<p>The impact if in YOUR name is minimal but if in HER name is a much bigger hit.</p>

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</p>

<p>[FinAid</a> | Saving for College | Account Ownership: In Whose Name to Save?](<a href=“http://www.finaid.org/savings/accountownership.phtml]FinAid”>http://www.finaid.org/savings/accountownership.phtml)</p>

3

<p>Yes, I would cash them before 12/31/2012. Put the money in a 529 account with her as the beneficiary. She could be the account owner and it would still be considered “parent assets” on the FAFSA.</p>

4

<p>Thank you for the reply! The bonds were purchase by my wife and have both their names (I think) on them but only our daughters social security number on them.</p>

5

<p>If cashed out could the money be placed in parents savings account as a protected asset?</p>

6

<p>If cashed out, whoever owns them can use them for whatever they see fit. So yes, the money could be put into a parent’s savings or checking account.</p>

<p>You wouldn’t need to do this before 12/31/2012. You would need to do it before filing the financial aid paperwork. So cash them and deposit them into the bank account on Monday, and file the FAFSA on Tuesday and it’s all good.</p>

7

<p>If cashed before end of the year the 1099’s would be for daughters 2012 tax year instead of 2013. Not sure which would be better? She has maybe $1000 of income in 2012.</p>

<p>Thanks for all the help everyone, much appreciated!</p>

<p>Jeff</p>

8

<p>Run your figures through the 20013-2014 FAFSA formula and see what they look like. Here’s the link: <a href=“http://www.ifap.ed.gov/efcformulaguide/attachments/091312EFCFormulaGuide1314.pdf[/url]”>http://www.ifap.ed.gov/efcformulaguide/attachments/091312EFCFormulaGuide1314.pdf&lt;/a&gt;&lt;/p&gt;

9

<p>If your wife and daughter are co-owners of the bonds, then the interest will be reported in the name of whoever cashes the bond. Doesn’t matter whose SSN is on the bond. So if your wife goes to the bank, signs the back of the bond, puts down her SSN, the 1099-INT will come in her name and SSN. Happymom is right, you wouldn’t need to do this before 12/31/12, but before you file FAFSA. That’s what I meant to say!<br>
Whether it would be better for this tax year or the next depends on how much interest, other income, and anticipated 2013 income.</p>