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.