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Coverdell Education Savings Accounts

A Coverdell Education Savings Account (ESA) can play an important role in helping pay for qualified education expenses.

Most of the American Funds, including the American Funds Portfolio Series℠, are available for Coverdell ESA investments.

Who Is Eligible?

Your clients can contribute to a Coverdell ESA even if they don’t have earned income. The contribution is limited to $2,000 a year for each beneficiary until the age of 18.

The ability to contribute is phased out as your client’s adjusted gross income increases from:

  • $95,000 to $110,000 for individuals
  • $190,000 to $220,000 for married couples filing jointly

Who Would Benefit?

Clients who expect to use the funds for K-12 and beyond
A Coverdell ESA can be used for education expenses such as tuition, books, computers, software, peripherals, internet access, and room and board for kindergarten through high school, college and graduate school.

Earnings grow tax-free with the potential to help offset rising education costs.

Clients who may want the beneficiary to gain control of the account
The beneficiary can assume control at the age of majority — 18 or 21 in most states.

Clients who want flexible investment options
Most of the American Funds are available in Coverdell Education Savings Accounts; account owners can change investments as often as they want.

American Funds Portfolio SeriesSM

Objective-focused — These “funds of funds” offer diversification and control in a single investment.

Individual Mutual Funds

Customization — Build an education savings portfolio of your preferred American Funds, or select a single-fund option. Either way, you control the investment mix.

Note: Tax-exempt funds are not available for Coverdell ESA investments.

Set Up an Account

Investments are not FDIC-insured, nor are they deposits of or guaranteed by a bank or any other entity, so they may lose value.

This material is intended for use by financial professionals or in conjunction with the advice of a financial professional.

Investors should carefully consider investment objectives, risks, charges and expenses. This and other important information is contained in the fund prospectuses and summary prospectuses, which can be obtained from a financial professional and should be read carefully before investing. 

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