Coverdell Education Savings Accounts (ESAs) are one of the most popular methods of saving for college. You can build a portfolio with stocks, bonds, mutual funds and more. You can put up to $2,000 a year into a Coverdell education savings account (ESA) that you establish in the name of a minor child. You may find it best to work with the investment firm that handles most of your current investments, or you may find it better to work with a new company if they offer better rates or investment options. While deposits made into the account aren't tax deductible, you won't have to pay tax on the interest the money earns. When you set up a Coverdell education savings account, called a Coverdell ESA, Uncle Sam gives you some nice tax breaks to help pay for a child’s education. can be invested in stocks, bonds, mutual funds, and certificates of deposit Which savings plan has more investment options: the 529 plan or the Coverdell Education Savings Account? … Coverdell Education Savings Accounts are similar to IRAs, in that they allow account holders to make contributions to an investment account. The assets in the account can be invested any way you choose. Once money is in the Coverdell Education Savings Account, you can’t take it back–it must be used on behalf of the beneficiary. You could use a 529 prepaid or savings plan, UGMA or UTMA accounts, savings bonds, trusts, taxable accounts like bank or brokerage accounts, or the Coverdell ESA (Education Savings Account… But you don't have to be rich to benefit from an ESA. Another tool you can use for college savings is the Coverdell Education Savings Account (ESA). As the “responsible adult” designated in the account agreement, you have the discretion to maintain control of the funds until the beneficiary reaches age thirty, the point at which the account must be liquidated. With a 529 plan, you’re limited to the investment options in the plan sponsored by the state you choose. To help you fully understand how these accounts can be used to save for future tuition bills, the California Society of CPAs (www.calcpa.org) provides answers to some of the most frequently asked questions about these unique savings vehicles.. What Is A Coverdell Education Savings Account? The accounts are sometimes called education IRAs, but they really aren't IRAs, despite some similarities. Like the 529 plan, a Coverdell ESA is a common college savings account. A Coverdell Education Savings Account can be used to fund qualified education expenses recognized by the Department of Education through an accredited institution. By Jeff Brown Contributor May 11, 2016, at 9:16 a.m. Coverdell Education Savings Account funds can be used for what expenses? Coverdell Education Savings Accounts. As always, shop around for your needs. Coverdell education savings accounts, formerly referred to as education IRAs, help families save for future schooling costs by offering tax-sheltered growth. A Coverdell Education Savings Account or Coverdell ESA* (formerly known as an Education IRA) is a custodial saving account used for paying educational expenses. A 529 plan is a plan that can be used for higher education only. You have to follow IRS rules or lose the tax … The whole point of a Coverdell ESA is to save money for education expenses — both for college and K-12 — and cash it in tax-free. When the beneficiary of a Coverdell ESA (the student) withdraws money from the savings account, that's called a distribution.Distributions are tax-free if they meet both of the following criteria [source: IRS]: Your guide to Coverdell Education Savings Accounts This section of the guide is the Disclosure Statement describing yourAmeriprise Financial Services, Inc. Coverdell Education Savings Account asrequired by federal law. The tax benefits apply only to money used for education costs as defined by the Internal Revenue Service. In 2002, the Education IRA was renamed the Coverdell Education Savings Account. While both 529 plans and Coverdell ESAs can be used to help pay for education costs, there are a few important distinctions. Making the Most of a Coverdell Savings Account Coverdells can be used to pay tuition at private elementary and secondary schools. You can open a Coverdell ESA plan at a variety of locations. Because my client is interested in elementary and secondary education for his kids, I will leave it out.