Coverdell Education Savings Accounts (ESAs)

Educational expenses often sneak up on parents, so get started saving as early as possible to make sure you’re covered from enrollment to graduation. With a Coverdell ESA, your contributions grow tax-free and can be used to pay for qualified elementary and secondary education expenses.

The Basics

Anyone who meets income requirements can open and contribute to a student’s account –  grandparents, aunts, uncles and family friends. But the combined contribution to all Coverdell ESAs for each child cannot exceed $2,000 per year. Every Coverdell ESA must have one (and only one) parent or legal guardian to oversee the account. If the original child-beneficiary chooses not to attend college, you can roll over unused funds into the Coverdell ESA of another eligible child in your family, so long as the beneficiary receiving the funds is under the age of 30. Additionally, contributions can also be made on behalf of the same child to both a Coverdell ESA and a 529 Plan. Contributions to traditional or Roth IRAs will not reduce the amount you can contribute to a Coverdell ESA.