Coverdell 529 Education Savings Accounts were created to help parents and students save for education expenses. The total contribution cannot be more than $2,000 in any single year.
A 529 plan is a tax-advantaged savings account designed to be used for the beneficiary’s education expenses.
A beneficiary is someone who is under age 18, or has special needs. Contributions to a Coverdell ESA are not tax-deductible, but amounts deposited grow tax free until distributed. The beneficiary will not owe tax on the distributions if they are less than the qualified education expenses at an eligible institution. This benefit applies to qualified higher education expenses, as well as to qualified elementary and secondary education expenses.
If the distribution exceeds qualified education expenses, a portion will be taxable to the beneficiary and will usually be subject to an additional 10% tax. Exceptions to the 10% penalty include death or disability of the beneficiary, or if the beneficiary receives a qualified scholarship.
If there is a balance in the Coverdell ESA when the beneficiary reaches age 30, it must be distributed within 30 days. A beneficiary may avoid paying tax by rolling over the full remaining balance to a Coverdell ESA for another family member. Any remaining balance not used or rolled-over may be reported as unclaimed property at some number of years determined by each individual state, if contact with the owner has been lost.
To initiate a search for a missing Education Savings Account complete the form below:
