How a Coverdell Account Works
Coverdell accounts are trusts or custodial accounts created exclusively to pay for an individual's qualified education expenses for elementary school, secondary school or college expenses.
If there is a balance in the ESA when the beneficiary reaches age 30, it generally must be distributed within 30 days (or rolled over to another beneficiary under age 30).
Tax and Other Potential Benefits
Tax deferral can have a dramatic effect on the growth of an investment. With the Coverdell ESA, your contributions can grow tax-deferred and be distributed income tax-free as long as distributions are used for qualified education expenses, such as:
Tuition and fees
Books, supplies and equipment
There are income limits. Consult your tax advisor for more information.
How much will I need to save for college?
The amount you'll need to save depends on many factors, including:
How far in advance you begin saving
How many years of college you want to fund
The rising future cost of tuition
How much you've already put away
Your federal and state tax rate
The rate of inflation