A Coverdell ESA (Education Savings Account) is a trust or custodial account designed for paying the qualified education expenses of the designated beneficiary.
The account must be designated as a Coverdell Education Savings Account when it is created to be treated as such for tax purposes.
Funds contributed to a Coverdell ESA grow tax-free and may be distributed tax-free if they are used to pay for the educational costs of the beneficiary.
Assets can be rolled over from one Coverdell ESA to another, or the designated beneficiary can be changed.
Coverdell ESA distributions can be used for eligible educational institutions at any level: elementary, secondary, or university; whether public, private or religious.
You may use the account to pay for Coverdell qualified educational expenses such as tuition, uniforms, computers, and transportation for school.
Coverdell ESA (sometimes referred to as a Coverdell IRA or an Educataion IRA) Rules: Any amount distributed from a Coverdell ESA is not taxable if it is rolled over to another Coverdell account for the benefit of the same beneficiary or a member of the beneficiary's family (including the beneficiary's spouse) who is under age 30. This age limitation does not apply if the new beneficiary is a special needs beneficiary. An amount is rolled over if it is paid to another Coverdell ESA within 60 days after the date of the distribution. The beneficiary's interest can be transferred to a spouse or former spouse in the case of divorce.