Coverdell Education Savings Account
What is a Coverdell education savings account (ESA)?
A Coverdell education savings account (ESA) is an account set up to help save for a child’s education expenses. You generally may contribute to an ESA on behalf of any child.
What are the tax advantages of ESAs?
An ESA allows you to save for a child’s qualified education expenses. While contributions to an ESA are never tax-deductible, the earnings accumulate tax-deferred. Any distributions used to pay for qualified education expenses are tax-free. In addition, contributions you make to an ESA do not affect the contributions you make to a Traditional or Roth IRA.
Who actually owns the ESA?
While the child is the designated beneficiary and technically the owner of the ESA, generally a parent or legal guardian controls the account, deciding how the money in the account will be invested and spent. Once the child reaches the age of majority in your state, she may then take control of the account, unless otherwise indicated in the ESA plan agreement.