A Coverdell ESA (Education Savings Account) is a trust or custodial account designed for paying the qualified education expenses. Coverdell Education Savings Accounts (ESAs) allow parents or guardians to build tax-advantaged savings for their beneficiaries. You may modify beneficiaries at any time.
As with a Roth IRA, ESA contributions are not tax-deductible. However, distributions can be 100% tax-free if they're applied toward qualified education expenses. Barring special circumstances, ESA contributions are no longer allowed once the beneficiary reaches age 18 (regardless of the parent's/guardian's age).
ESA earnings can provide a tax-free avenue to pay for tuition, books, equipment, and transportation related to any level or manner (public, private, or religious) of education.
Barring special circumstances, ESA contributions are no longer allowed once the beneficiary reaches age 18 (regardless of the parent's/guardian's age). Any remaining ESA holdings must be distributed within 30 days of the beneficiary's 30th birthday. The same 30-day grace period applies if the beneficiary passes away prior to reaching age 30. An ESA may be rolled into another such account for the same beneficiary or for a member of the beneficiary's family if he or she is below age 30.
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