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Coverdell Education Savings Account (ESA)

Self-Direct Your Future with Tax Advantaged Coverdell ESA

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Invest Your Education Fund in Real Estate and Watch it Grow

The Coverdell Education Savings Account (ESA) allows you to save for future education expenses, while expanding the avenues you can invest in. This account can be self-directed into alternative investments allowing a wider range of investment options than the typical education fund. The Coverdell offers the flexibility for any individual (including the designated beneficiary) to contribute to the account provided they meet the income restrictions. For an individual contributor, the modified adjusted gross income (MAGI) limit is $110,000, and for individuals filing joint returns, that amount is $220,000. Organizations, such as corporations and trusts, can also contribute to Coverdell ESAs, with no income requirements.

Coverdell ESA

What are Qualified Distributions for a Coverdell ESA?

Qualified distributions are generally expenses required for the enrollment or attendance of the designated beneficiary at an eligible educational institution. An eligible educational institution is any public, private, or religious school that provides elementary education as determined under state law. It also includes any college, university, vocational school, or other postsecondary educational institution eligible to participate in a student aid program administered by the U.S. Department of Education.

Qualified distributions for eligible elementary, secondary, and post-secondary schools:

  • Tuition and fees
  • Books, supplies, and equipment
  • Room and board (must be incurred by students who are enrolled at least half-time)
  • Uniforms
  • Other qualified expenses

What are the Benefits of a Coverdell ESA?

  • Can be used for elementary, secondary, and post-secondary education, allowing more flexibility than other education savings plans.
  • Can be self directed allowing a wider range of investment options.
  • Qualified distributions are tax free.

Ready to Get Started?

Open a Coverdell ESA today.

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Frequently Asked Questions

What is the contribution limit for a Coverdell ESA?

The IRS sets limits for how much you can contribute to a Coverdell ESA. See the current contribution limits.

What are the distribution rules for a Coverdell ESA?

o   Distributions are tax free when used to pay for qualified education expenses. Generally, qualified distributions are expenses required for the enrollment or attendance of the designated beneficiary at an eligible educational institution.

Unqualified distributions will be subject to income tax and may be subject to an additional 10% penalty.

How do you invest with a Coverdell ESA?

It’s easy to invest with a Coverdell ESA in just 3 steps:

o   Open a Coverdell ESA with Quest.

o   Fund the account by making a contribution to the beneficiary.

o   Use the Investment Hub in the Client Portal to self-direct your investment. 

What are the requirements for a contribution?

Contributions must meet all of the following requirements:

o   They must be in cash.

o   They must be made before the beneficiary turns 18 (unless they are special needs).

o   They must be made by the due date of the contributor's tax return (not including extensions).

Is there an age limit to using an ESA?

An ESA can be used until the age of 30. After the beneficiary turns 30, the account can be rolled over to a qualified family member. The remaining assets must be distributed within 30 days after the beneficiary turns 30. This age limit does not apply if the beneficiary has special needs.

Who owns a Coverdell ESA?

While the child is the beneficiary, the parent or legal guardian is the owner of the account. Once the child reaches the age of majority, they may have the ability to take over ownership of the account. 

Schedule a 15-minute call with a certified IRA Specialist

Not sure where to start? We’re here to help. From opening an account to funding your first investment, we are here for you every step of the way.

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