Practice Quiz

Financial Planner

Category - Investment Planning

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Your client as 20 years old and has several thousand dollars’ worth of EE bonds that he was gifted on his first birthday. The client’s EE bonds are hitting maturity and taxes will be due. The client is also starting college and funds to pay for school. What would you suggest the client do to address their financial dilemma?
  1. Suggest the client exchange the current bonds for HH bonds
  2. Suggest they use the bonds for college tuition
  3. Both A and B
  4. Neither A or B
Explanation
Answer: C - To address the issues of maturing EE bonds and the need pay tuition, a financial planner should suggest the client pay for tuition using the EE bonds since they can be completely excluded from grows income if the bond proceeds are used to pay qualified higher education expense. The left over bonds can be exchanged to HH bonds to further the maturation period. It should be noted that the interest earned from E, EE, H, and HH bonds is U.S. government interest and is not taxable by municipalities.
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