{"id":163485,"date":"2013-05-21T04:00:21","date_gmt":"2013-05-21T11:00:21","guid":{"rendered":"http:\/\/getrichslowly.org\/blog\/?p=163485"},"modified":"2018-11-20T23:48:24","modified_gmt":"2018-11-21T07:48:24","slug":"how-to-save-for-college-though-begrudgingly","status":"publish","type":"post","link":"https:\/\/www.getrichslowly.org\/how-to-save-for-college-though-begrudgingly\/","title":{"rendered":"Coverdell Savings Account: Definition, Pros and Cons"},"content":{"rendered":"
A Coverdell savings account, or a Coverdell Education Savings Account (ESA), is an investment account that is tax-free when used for qualified higher-education expenses.<\/p>\n
Assets in Coverdell accounts can be transferred to other family members if the beneficiary doesn’t need the money (whether because of scholarships or other circumstances) and many find the main benefit is that these funds can also be used for K-12 school-related expenses. The biggest drawback is that you cannot contribute more than $2,000 per year, even across multiple accounts.<\/p>\n
Here’s more:<\/p>\n
Coverdell\u00a0ESA Basics<\/strong><\/p>\n How to open:<\/strong> The Coverdell ESA is opened with a brokerage or mutual fund company and its assets are owned by either the parents or the student.<\/p>\n Limits:<\/strong> Contributions are phased out at incomes between $95,000 and $110,000 for single tax filers, $190,000 to $220,000 for married filers (though there are some ways around these limits). Contributions can be made until the student turns 18 and must be withdrawn by age 30. The deadline to open a Coverdell ESA: April 15.<\/p>\n Related: What the IRS says about Coverdell accounts<\/a><\/p>\n Investment choices:<\/strong> Whatever is offered by the company with which you’ve opened the account.<\/p>\n Impact on financial aid:<\/strong> Depends on the account owner. Assets owned by a student have a greater negative impact on aid eligibility than assets owned by the parents, though this impact is lessened if the student is still a dependent of the parents.<\/p>\n