• 529 college savings plan

• Coverdell education savings account

• Other funding options

Coverdell education savings account

A Coverdell Education Savings Account (ESA) is a savings account funded with after-tax contributions for the educational benefit of a child. Almost anyone can make contributions – parents, grandparents, friends, corporations, and tax-exempt organizations. 

The maximum allowable contribution to a child’s ESA is $2,000 each year. So, if you contribute $1,500, additional contributions for that child for the year from other contributors can amount to no more than $500. You can, however, make contributions to the ESAs of as many beneficiaries as you like. Contributions can be made to the account until the child reaches age 18. That age is extended for individuals who require additional time to complete their education as a result of a learning disability or a physical, mental, or emotional condition.

School selection

The assets of a Coverdell account can be used at any elementary (kindergarten through grade 12), secondary, and accredited post-secondary public, private, or religious school.

Investments 

COUNTRY investment choices include the COUNTRY Mutual Funds and several other selected external funds.

Taxes

All contributions are made on an after-tax basis, but the contributions do qualify for the annual gift tax exclusion. Also, earnings grow income-tax deferred, and withdrawals to pay for qualified educational expenses (see below) are tax-exempt.

The beneficiary has until 30 days after reaching age 30 to use the money, unless that beneficiary is a special needs beneficiary—an individual who requires additional time to complete his/her education as a result of a learning disability or physical, mental, or emotional condition. Withdrawals not used for educational purposes may be subject to a 10% penalty. Withdrawals of earnings will be included in the beneficiary’s taxable income.

Contributions to an ESA are not considered in calculating contributions to IRAs. Therefore, even if you make the maximum allowable contribution to your IRA, you may still make a contribution to a Coverdell if your income meets the modified adjusted gross income requirements. 

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Ownership and control

The account owner controls the account for the benefit of the beneficiary. However, assets generally become the child's property at 18.

Beneficiary change

The owner can change the beneficiary to another family member as beneficiary. 

Contribution limits

Based upon modified adjusted gross income (MAGI), there are contribution limitations as follows:

¹Corporations and other entities (including tax-exempt organizations) can contribute regardless of income of the entity during the year.

Qualified educational expenses

Covered expenses include:

• Tuition
• Books
• Education equipment (including computers)*
• Fees
• Supplies
• Educational technology (including Internet access & related services)*
• Academic tutoring*
• Uniforms*
• Supplementary items
• Room and board
• Transportation*

*Elementary and secondary school expenses only                                                                                      

Do your homework and learn about our other funding options or find a COUNTRY Financial representative near you to get personalized assistance.

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