One of the biggest risks of zero coupon bonds is their sensitivity to swings in interest rates. It can be a wild ride: The bonds will provide income for the children without increasing their tax liabilities. Login Advisor Login Newsletters.
Various local municipalities are significant issuers of zero-coupon bonds as they seek to raise capital to support infrastructure and other projects; some of these bonds are triple tax-free , with the income they generate exempt from income tax at the federal, state and local levels.
The information in this material is not intended as tax or legal advice. Picking the right tool for the job can help you achieve your objective. Login Advisor Login Newsletters. Related Terms Zero-Coupon Convertible A zero-coupon convertible is a fixed income instrument that combines a zero-coupon bond and a convertible bond.