Coverdell Educational Savings Account

Every parent worries about the cost of post-secondary education for their children. But there are ways to prepare. With the Coverdell ESA, you can begin making investments to pay for the future cost of college or technical school training today!

What Is a Qualified Education Expense?

A qualified education expense is one that is required for the enrollment or attendance by your child at an eligible educational institution, including elementary, secondary or post-secondary institutions.

These expenses include:

  • Tuition
  • Fees
  • Books
  • Supplies
  • Equipment

Who Can Contribute to an ESA?

The answer to that question is "almost anyone."

A person may be limited in the amount of their contribution if their modified adjusted gross income exceeds a certain amount. For income limits refer to the section titled "How much can I contribute."

The ESA does not specify that the contributor must be a member of the family. With this broad range of potential contributions, it is possible that more than one person may want to contribute for the same child. However, there is a limit of $2000 per child per year no matter the number of people who plan on contributing. Therefore, a coordinated effort should be encouraged to avoid excess contributions.

How Much Can I Contribute To an ESA?

Full Contribution Partial Contribution No Contribution
Single Tax Payer MAGI $95,000 or less MAGI more than $95,000 but less than $110,000 MAGI $110,000 or more
Married, Filing Jointly MAGI $190,000 or less MAGI more than $190,000 but less than $220,000 MAGI $220,000 or more

MAGI = Modified Adjusted Gross Income

Each child can receive a total of $2,000 per year in contributions from all sources. It does not make a difference if this is done in a single account or multiple accounts designed to benefit the same child.

Can I Roll Over Funds From Another ESA?

You can roll over funds from one ESA to a new or existing ESA only. The funds, however, must benefit the same child or an eligible member of the child's family. A rollover contribution does not affect the $2,000 annual contribution limit. Rollovers must be completed within 60 days of the initial distribution and are limited to one per 12-month period.

Am I Allowed to Change the Designated Beneficiary?

You may change the designated beneficiary (child). An example of why someone may wish to change the designated beneficiary is the current designated beneficiary has completed their education and there are funds remaining. The only stipulation is that the new designated beneficiary must be an eligible member of the family.

Who is a Member of the Family?

There are several possible family members. They would include:

  • children, grandchildren and stepchildren,
  • brothers, sister, stepbrothers and stepsisters,
  • nephews and nieces,
  • parents, stepparents and grandparents,
  • uncles and aunts,
  • spouses of all the family members listed above, and
  • cousins.

It is important to remember that even with this extended range of family members, contributions can be made only for those under the age of 18, unless the beneficiary is a special needs beneficiary.

Rates and information are subject to change at any time. Recurring deposits may be made into the certificate through automatic transfers (ATS) only. You may set up recurring deposits through ATS within 30 days after the certificate is purchased. Deposits can be stopped or reduced at any time. This rate will be paid until the certificate matures. Your certificate will automatically renew at the rate in effect at the time of maturity unless we are contacted on or before the maturity date. Upon renewal, the term will be the same as the original term. You have ten calendar days after maturity to redeem your certificate without penalty if you do not want to renew. Dividends will not accrue on the certificate after the maturity date unless it is renewed. A penalty will be imposed for early withdrawal. A minimum daily balance of $500 must be maintained in order to earn the disclosed APY.