Should one roll EE bonds to a 529 plan or rebuy bonds for future education?

by the way, my parents were extremely old school (only CD, bonds, IRAs) and I saw the advantages of doing this instead of risk investments, so I too am a bit nervous about the 529 plan but I want to do the best thing all the way around.

529 plans are very flexible. So I wouldn't worry too much on that end. Even if your son does not go to school the money would be available to you. From the Wiki: With few exceptions, the named beneficiary has no rights to the funds. Most plans even allow you to reclaim the funds for yourself any time you desire, no questions asked. However, if a "non-qualified" withdrawal is made, the earnings portion will be subject to income tax and an additional 10% penalty tax. However you may be fretting the taxes too much. Run some numbers and try to determine the minimum tax effect by spreading the bonds out over two or three years. If your Dad is on Social Security, there may be no taxes due at all depending on other deductions such as interest on real estate and property or state taxes.

Also, you can't buy more than $5000 worth of new bonds in a calendar year any more, so grandpa wouldn't be able to sell his and then buy an equivalent batch. Plus, even if he could, the yields on new bonds would be way lower than what the bonds are now getting. Depending on how old the bonds are, some might mature before grandson is old enough for college. Bonds stop earning interest 30 years after purchase. No problem. You still don't have to cash them in. But at that point, the decision would likely rest on how much taxes would be owed on the accrued interest, and thereby lost, compared to how much interest would be "lost" by not reinvesting the net proceeds. As I said in previous post, an estate planner is a good idea at some point in this process. Of course, that costs money, too.

Thanks qurlyjoe. Most look like they will mature in 2020/22 so not enough time for college. I just wanted to look into some options for him to 1) get my mom's name off of them (dad is not in good health so I didn't want them to go to probate/to waste) and 2) make him feel good that a huge portion would go to his grandson's college while he was alive, ensuring I didn't blow it. (not that it's a concern but it has been a mantra of his while he's grieving---"your mom said do not blow the money on stupid things." For me, even 1/2 of the bond cashed out/roll over for his college will pay his entire way once something matures by the time he's 18. Even with scholarship options or maybe even seeing if he can earn his way by himself and then after he graduates give him the money as a loan pay out. The rest, I'm just going to put towards retirement. I'm very, very blessed and grateful my dad worked so hard for this money and my mom stocked away everything they owned. I just wish they treated themselves to it. It was always the thorn in my mom's side to the very end. She always wanted to move and travel--dad never did either. Now all he cares about is having me and my son have a future and he's beyond words depressed and giving up. It kills me so all I can think about is honoring their wishes by doing what is right with the money. Thanks for your help. I was looking at the treasury site about rolling them over into a trust and then taking mom's name off of them. Sounds like the best option.

The nice thing about US savings bonds is they are very liquid. You can cash them in any time, and then pay tax on the accrued interest up to that point. Or you could just let them sit, and accrue interest. I'm guessing, from the maturity date range you mention, that the yield on these bonds is in the 4-5% range. Way better than what you'll get from CDs currently, or a regular savings account. Plus, cashing them in now would result in a huge tax hit for your dad. No idea how they'd be invested by a trust, or how to transfer them to a trust. I know what you mean about how they saved but never enjoyed the money. My in-laws were the same way. Good for the wife and me--it's funding our retirement--but sad for them. What made the conversion easy for us is that the bonds were always co-owned by the wife and her mother. When her mother died, we were able to remove her name and add mine as a co-owner. If the ones you've got have just a single owner, that makes it trickier to do what we did. If your father is the sole-owner of the bonds now, you can add you or your son as a co-owner, with no penalty, no cashing in the bonds. On your dad's passing, you could remove his name, again with no penalty or tax paid. If your mother was the owner of the bonds, you could still do this, but it would involve some chicanery, in that technically your mother would have to sign the form.