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  • Earnings are free from federal taxes when withdrawn for qualified education expenses.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.

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