Educational Savings

The Coverdell ESA is NOT a retirement arrangement.  It is a trust or a custodial account created only for the purpose of paying the Education Expenses at a qualified institution of the Designated Beneficiary of the account.

Who is the Designated Beneficiary?
The designated beneficiary is the child on whose behalf the trust or custodial account has been established.

Qualified Education Expenses
Education expenses include qualified elementary and secondary education expenses, in addition to post-secondary higher education.

Examples:
Tuition, Fees, Books, Supplies, Academic Tutoring, Equipment, Special services in the case of a special-needs beneficiary, and Room and board if the beneficiary is at least a part-time student at an eligible
educational institution.

Contributions & Limits
Any individual may contribute to a child’s Coverdell account if their modified adjusted gross income meets the IRS guidelines which are:

• $95,000 for single persons, with a phase out up to $110,000.
• $190,000 for married couples filing jointly, with a phase out up to $220,000.
• The maximum contribution per year per child is $2000.
• Contributions are NOT permitted once the child turns 18 years of age.
• Contributions will be accepted until April 15th for the previous year.

Distributions & Penalties

• Earnings withdrawals from a Coverdell ESA are “tax-free” if funds are used for qualified educational expenses at qualified educational institutions.
• The funds in this account must be distributed to the beneficiary within 30 days after the beneficiary reaches the age 30 or upon their death.
• Non-qualified distributions will incur an IRS penalty of 10% and taxation.