Coverdell Education Savings

A Coverdell Education Savings Account (also known as a Coverdell Education Fund) is an investment account which is designed to encourage savings for future education expenses such as tuition, books, uniforms, meal plans, and the like.  A minor may own securities in this sort of account because of the Uniform Gifts to Minors Act (UGMA) and the Uniform Transfers to Minors Act (UTMA) which allow minors to own securities without an attorney setting up a trust fund, as long as the donor of the funds to the account (the parents in many cases) are appointed as custodians to the account.

UTMA and UGMA

Through the UTMA, which is an extension of the UGMA, Coverdell Education Accounts allow money to grow tax deferred and allow the proceeds to be withdrawn tax free for qualified education expenses.  The definition of qualified expenses in a Coverdell Education Account includes primary and secondary school, not just college and university as is the case with a 529 Plan.

Coverdell Contribution Maximum

There is a maximum annual contribution of $2000 per child into the account.  As opposed to a 529 Plan, a wide variety of security types can be held in a Coverdell Education Account.  In other words, stocks and bonds, as well as other items, may be purchased through this account. The income level of the donor, however, may affect contribution size into a Coverdell Education Account.  On the other hand, funds in the account are not considered the beneficiary’s money when applying for federal need based financial need. Lastly, funds must be distributed by the time the beneficiary is 30 years old.

Coverdell Education Savings Financial Planning Help

It is integral that an individual contacts a qualified professional with any questions that he or she may have.  An experience coverdell education savings financial planning professional should be contacted whenever a person seeks financial help.