State to Sell ‘College Saver’ Bonds Again Soon
Q: What happened to the “college saver” tax-exempt state bonds that went on sale last year? They sold out so quickly that I didn’t have a chance to buy any. Will there be another sale? --A. M.
A: Yes, another sale is coming soon.
State Treasurer Kathleen Brown is expected to announce in a few weeks that a $30-million sale aimed at small investors will be held sometime in June. The lead underwriter will be Grigsby, Brandford, Powell Inc., a San Francisco brokerage. More details will be available in upcoming weeks. You can get the information by writing to the state Treasurer’s Office, 915 Capital Mall, Room 110, Sacramento, Calif. 95814.
Like its predecessor, the upcoming small-saver bond issue will be sold in minimum face-value denominations of $1,000, rather than the traditional $5,000 minimum face value. This means that investors with as little as $250 to $300--depending on the interest rate the bonds carry--would be able to buy a bond worth $1,000 in 18 years.
Also like their predecessors, the new bonds do not have to be used to finance a child’s college education. There are no restrictions on how the proceeds may be used: The first issue was as popular among taxpayers saving for their retirement as it was with families interested in financing their children’s education.
However, at Brown’s urging, state Sen. Gary Hart (D-Santa Barbara) has introduced a bill offering financial incentives to investors who use the bonds to finance a child’s higher education. One proposed incentive would give bondholders the right to exclude up to $25,000 from income calculations used to determine a student’s eligibility for state student financial aid. Another incentive is that students redeeming bonds worth at least $5,000 would be eligible for a bonus of up to $400 in financial aid.
Still, nothing in the proposed legislation would prohibit investors from using the bonds for purposes other than financing a college education. And tax advantages of the state bonds would remain available to all investors, not just the low-and middle-income buyers who are the primary beneficiaries of the new federal Series EE college savings bonds.
Some background about the state bonds bears repeating. California’s college-saver bonds are, for all practical purposes, no different from traditional zero-coupon municipal bonds. Like zero-coupon California munis, these bonds are exempt from state and federal taxes and pay interest only at maturity.
And like traditional munis, they are best purchased only by those in the highest tax bracket--since one of their major advantages is their tax-exempt status. Finally, you should probably not consider buying these bonds if you might have to sell them before they reach maturity. The value of zero-coupon bonds can fluctuate wildly in the secondary market because of interest rate changes.
Probate Must Precede Title to Father’s House
Q: My father died recently. In his will he left his possessions, including his home, to my brother and me. We have been trying to put our names on the title to the home, but the county refuses to recognize the change in ownership until my father’s will is probated. We have consulted two attorneys about this and have received conflicting advice. Who is right? --D. H.
A: According to our experts, the probating of your father’s will must be completed before title to his assets can be legally changed to your name. This is what the probate process is all about: changing title to assets passed on at death.
In our society, we typically recognize a signed document as evidence that a transaction has been completed. However, when someone is dead, no signature is available to attest that the instructions contained in the will have been carried out correctly. Enter the probate judge, who, as substitute for the deceased, affirms that the will has been properly executed and enters the appropriate and signed court ruling.
The bottom line is that you must wait for the probate process to be completed to take title to his home. The county was correct in denying your initial request. Once probate is over, notify the county and present the court order. You should have no problem.
Also, be sure to explain that the property you are getting was your father’s principal residence. Gifts of personal residences, plus any other real estate worth up to $1 million, are exempt from reappraisal for property tax purposes. So, in addition to getting your father’s house, you get the property tax bill he was paying. If he had the home for a long time, his relatively low tax bill can be a gift in itself in Southern California, because property here has appreciated wildly in recent years.
