Investment earnings accumulate tax free, and withdrawals are tax free as long as they’re used to pay for qualified education expenses (such as tuition, fees, books as well as certain room and board expenses) at eligible educational institutions. Contributions are not tax deductible.
Your clients may contribute up to $2,000 annually to a Franklin Templeton Coverdell ESA on behalf of a designated beneficiary under the age of 18. Contributions cannot be made after a child turns 18 (except in the case of a Special Needs Beneficiary).
A Special Needs Beneficiary is an individual who, because of a physical, mental or emotional condition (including a learning disability), requires additional time to complete his or her education.
Your clients can contribute to both a Coverdell ESA and a 529 college savings plan on behalf of the same beneficiary, as long as assets are not used to pay for the same qualified expenses.
Any individual whose modified adjusted gross income (AGI) is less than $95,000 (single) or $190,000 (joint) can make a full annual contribution of $2,000. Reduced contributions are allowed for individuals with AGIs between $95,000 and $110,000 (single) or $190,000 and $220,000 (joint).
The deadline to make contributions to a Franklin Templeton Coverdell ESA is your client’s tax-filing deadline (usually April 15), not including extensions.
Assets in the account must be distributed to the designated beneficiary by age 30, or transferred to another Coverdell ESA for the benefit of another eligible family member — except in the case of a Special Needs Beneficiary.
Distributions for qualifying education expenses are tax free. If the distributions are more than the beneficiary’s qualified education expenses for the tax year, a portion of the distribution will be taxable to the beneficiary.
A $15 maintenance fee will apply, regardless of the number of funds your client chooses. This fee is automatically deducted from their account each year, unless they pay the fee separately by check.
Franklin Templeton is one of the largest mutual fund organizations in the U.S., offering a variety of professionally managed mutual funds covering every major asset class. Whether your clients’ risk/reward profile leads to a conservative, moderate or aggressive asset allocation plan, Franklin Templeton Investments offers funds to meet their investment needs.
Before your clients invest, they should carefully consider a fund’s goals, risks, charges and expenses. This and other information is contained in the fund’s prospectus. Please have your clients read the prospectus carefully before they invest or send money.
Franklin Templeton Coverdell Education Savings Account (ESA) is designed to help accumulate assets for a child's elementary, secondary and post-secondary education. It can help your clients pay for qualified education expenses such as tuition, fees, books, supplies, and certain room and board costs at eligible elementary, secondary and post-secondary educational institutions.