Coverdell Education Savings Accounts

Every parent looks at their child and wonders what the future holds.

  • What jobs will be available?

  • What kind of training will my child need college or technical school?

  • Will the money be there for their education?

You may not know the answer to the first two questions, but a Coverdell education savings account (ESA), can help you with the last answer.


A Coverdell Education Savings Account  is a savings arrangement in which contributions are invested for the purpose of funding an individual’s education.  These contributions are not tax-deductible, but the contributions may earn interest tax deferred until distributed, and the child will not owe tax on any withdrawal from the account if withdrawal is equal to or less than the child’s qualified education expenses at an eligible educational institution for the year. Amounts withdrawn from the account that exceed the child’s qualified education expenses in a taxable year may be subject to income tax and to an additional penalty of 10 percent. If the child does not need the money for pre- or postsecondary education, the child may roll or transfer the account balance to an eligible family member’s ESA or to a qualified tuition program (QTP).


Eligible taxpayers may deposit up to $2,000 per year into a Coverdell ESA for a child under the age of 18. Parents, grandparents, other family members, friends, and even the designated beneficiary of the ESA (child) may contribute to an ESA for the same child, but the total contributions for a child for a taxable year cannot exceed $2,000. Eligible taxpayers may contribute up to $2,000 for multiple children in a year, however.


Contact one of our member service representatives for more details today.