Coverdell Education Savings Accounts
Formerly known as the “Education IRA,” this savings alternative is a trust or custodial account used for education expenses. Raymond James does not offer Coverdell Education Savings Accounts as a custodian. However, we are contracted to offer these accounts through certain mutual fund companies.
Benefits
Coverdell Education Savings Accounts (ESAs) offer several advantages.
Earnings are free from federal taxes when withdrawn for qualified education expenses.
Unlike most other education savings accounts, funds can be used for primary and secondary education in addition to higher education.
You can contribute to a Coverdell Education Savings Account and a 529 savings plan during the same year.
You have full investment control.
Unused portions of the account may be transferred to another family member.
Considerations
Before investing in a Coverdell Education Savings Account, consider these points.
Total contributions are limited to $2,000 per year.
Earnings are taxed and subject to a 10% penalty if not used for qualified primary, secondary or higher education purposes.
Income limitations may prohibit some individuals from contributing.
When the beneficiary turns 18, contributions can no longer be made, and at age 30 the account needs to be closed.
