Calling all grandparents, aunts, uncles and godparents! Give that special child the gift of education.
The Coverdell Education Savings Account (ESA) offers tax-free, penalty-free withdrawals, including interest earned, when used for purposes related to education.
Anyone can contribute to a child’s ESA. What a great way to stay connected to your special child. For birthdays and other special occasions, make a contribution to his/her ESA.
Every ESA must have one “responsible individual” designated to oversee the account.
Contribution Limit
The total contribution you can give each year to a child is $2000. (Check with your tax consultant to make sure your income level would not disqualify you.)
You can contribute to as many ESAs as you want. For example, parents with three children could contribute $2000 to each child’s ESA each year.
You can make contributions to a child’s ESA until he/she reaches the age of 18. This age limit does not apply to special needs children.
Withdrawals: When and What For
The “responsible individual” can withdraw the funds. To avoid tax consequences the funds must be used for education purposes. In addition to tuition, board, uniforms, field trips, education abroad and seminars, these expenses might also include books, fees, and equipment, such as a computer. Education-related expenses, apply to students from elementary to post-secondary, until the beneficiary is 30 years old
Transfer Funds To Another Child
What if the beneficiary reaches age 30 and he/she has not used all the money in the ESA or decides not to pursue higher education? At any time the funds can be transferred to another family member under the age of 30. The age limit does not apply to a special needs beneficiary.
Make It Easy
Use payroll deduction to have contributions made to an Education Savings Account directly from your paycheck. Like with the traditional and Roth IRA's interest is compounded quarterly.
Pump Up Your Compounding – Increase Your Interest
Choose a CD for your IRAs and receive two advantages: your interest is compounded monthly and you receive a higher interest rate.
You will find that our CD rates are the best in the area. We invite you to compare.
More Information
For more information and to find out how a scholarship affects the funds you may withdraw, contact the Financial Services Representative at the credit union at 479-4040.
