Open Account

Introduction

1


A Coverdell ESA (
Education Savings Account) is a trust or custodial account designed for paying the qualified education expenses of the designated beneficiary.

2


The account must be designated as a Coverdell Education Savings Account when it is created to be treated as such for tax purposes.

3


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.

4


Assets can be rolled over from one Coverdell ESA to another, or the designated beneficiary can be changed.

5


Coverdell ESA distributions can be used for eligible educational institutions at any level: elementary, secondary, or university; whether public, private or religious.

6


You may use the account to pay for Coverdell qualified educational expenses such as tuition, uniforms, computers, and transportation for school.




















 

Self-Directed IRA Educational Videos

Foundations of Self-Directed IRAs

Start with the basics and explore this retirement account introduction. Learn how retirement plans can participate in a variety of investments, including real estate, precious metals, and more. This presentation is geared toward beginners and those who are just getting started with retirement plans.
 
Watch Webinar Now  

Rollovers and Other Transfers

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.

  • Coverdell ESA Contributions at a Glance

  • Are contributions deductible?
  • No

  • What is the annual contribution limit per designated beneficiary?
  • $2,000 for each designated beneficiary.

  • What if more than one Coverdell ESA has been opened for the same designated beneficiary?
  • The annual contribution limit is $2,000 for each beneficiary, no matter how many Coverdell ESAs are set up for that beneficiary.

  • What if more than one individual makes contributions for the same designated beneficiary?
  • The annual contribution limit is $2,000 per beneficiary, no matter how many individuals contribute.

  • Can contributions other than cash be made to a Coverdell ESA?
  • No

  • When must contributions stop?
  • No contributions can be made to a beneficiary's Coverdell ESA after he or she reaches age 18, unless the beneficiary is a special needs beneficiary.

  • When assets must be distributed:
    Apart from Coverdell qualified education expenses, any assets remaining in a Coverdell ESA must be distributed when either one of the following two events occurs:
    • The designated beneficiary reaches age 30. In this case, the remaining assets must be distributed within 30 days after the beneficiary reaches age 30. However, this rule does not apply if the beneficiary is a special needs beneficiary.
    • The designated beneficiary dies before reaching age 30. In this case, the remaining assets must generally be distributed within 30 days after the date of death.
Loading