Saving for your child(ren)’s education can feel like a task as parents, but it’s not mission impossible. While there several education savings options out there, sometimes it could be confusing and hard to distinguish. But we may be able to help, here at USAgencies, we offer Coverdell Education Savings Accounts.
Coverdell Education Savings Accounts (ESA’s) are tax-advantaged accounts that help families save for education expenses*. This includes elementary, secondary and college expenses. They have similarities to a 529 Plan, but also stand a part as well.
A Coverdell ESA offers tax-free earnings on growth, as well as offer tax-free withdrawals when the funds are being used for qualified expenses. Since ESA’s aren’t just for college, they can be used to pay for qualified expenses throughout a student’s K- 12 education. This includes things like fees, books, uniforms and equipment. ESA’s can receive contributions of a maximum of $2,000 per year.
A great feature of an ESA is that anyone – family or non family member – can contribute to a child’s ESA, as long as the contributor falls within the specified modified adjusted gross (MAGI )income limits. This limit is set per child as well. For example, if there were three children with ESA’s, depending on a contributors MAGI, they may be able to contribute to total of $6,000 across the three ESA’s. It is important to note, that each child may receive no more than $2,000 per year, so if several individuals are making ESA contributions for the same child, coordinating the efforts will ensure that the total contributions are not in excess. Contributions can be made until the child is 18, and withdrawals are allowed until the student is 30 years old **.
Every ESA must have a “responsible individual” assigned to oversee the account. This person will be in charge of directing investments within the account, and also decides when to withdraw funds. Most often, the responsible individual is a parent or legal guardian of the child, however it is not a requirement. Once the child becomes an adult, they may serve as the responsible individual.
Coverdell ESA’s are a great option, and something to consider if you will have a K-12 expenses beyond tuition, and are looking for more options for your child(ren)’s college savings investments.
*you may want to seek competent tax advice before contributing to or opening an ESA.
**The age 18 and 30 limits do not apply to special needs individuals.
Ready to open a Coverdell ESA? We are here to help. Connect with a Member Relationship Specialist at 503-275-0300 option 3, or stop into our branch located at 95 SW Taylor St., Portland, OR 97204. We can’t wait to see you.
