Coverdell ESA
Education Savings

Coverdell ESA Helps Save for Education Costs

Planning for the future requires a sensible strategy focused on your goals. When you're saving for education expenses and retirement, our Individual Retirement Accounts (IRA) provide solutions with solid growth opportunities. No matter what your current income level, you can find a retirement plan for your future. Each option provides different benefits, so consult your tax advisor for complete details about tax advantages.

What is an ESA?

An Education Savings Account (ESA), also known as a Coverdell ESA, is a trust or custodial account set up by a parent or guardian of a child (known as the beneficiary), that is used to pay for education expenses for elementary, secondary and even higher education for that particular beneficiary. There are a few benefits and restrictions which you should know when considering setting up an ESA.

The Basics of the Coverdell Education Savings Accounts (ESA):

• Coverdell ESA may be used to pay for qualified student education expenses for grades K-12 and higher education
• Account(s) must be set up and all contributions made before the beneficiary turns 18, unless the account is for a special needs beneficiary
• Contributions of up to $2,000 per beneficiary per year
• Distributions are tax free as long as they do not exceed the qualified educational expense(s)

Does a Coverdell ESA Make Sense for You?

Additional Important Facts about the Coverdell Education Savings Account (ESA)

• Income limits (MAGI Modified Adjusted Gross Income) determine eligibility for setting up and contributing to these accounts. Limit of $110,000 for single filing and $220,000 for joint filing
• $2,000 per year contribution limit per beneficiary, even with multiple ESA are established for that beneficiary
• Portion of the distributions may be taxed if they exceed qualified education expense(s)
• Contributions are not tax deductible
• Coverdell ESA is not the same as a 529 account, but can be used along with a 529 Savings to cover education expenses
• Distributions must be used with 30 days of the beneficiary turning 30 years old, unless he/she is a special needs beneficiary. Remaining balance will be distributed to beneficiary and taxed at the current tax rate
• For more information on an ESA, including restrictions, limits and tax returns, please visit the Coverdell Education Savings Account page on the IRS website.

Differences Between a Coverdell Education Savings Account (ESA) and a 529 Plan

• Coverdell ESA is a custodial account, and belongs to the beneficiary. 529 plan belongs to the account holder who set it up
• Coverdell ESA may be used for primary and secondary (K-12) expenses as well as high education expenses. 529 may only be used for K-12 expenses
• Coverdell ESA has income restrictions, whereas the 529 does not
• For more information on an ESA, including restrictions, limits and tax returns, please visit the Coverdell Education Savings Account page on the IRS website.

Getting Started

Setting up an ESA

Getting started is as easy as following one of the links above.

• After following the link, Select "Open an IRA/HSA"
• Then select the account type Eduction Savings Account (ESA)
  • You will need your SSN and the SSN of any beneficiaries you are adding
• New ESA accounts are typically set up within 1 business day