Coverdell Education Savings

Coverdell ESAs are specifically designed to help fund a child’s elementary, secondary and post-secondary education. They can help to pay for qualified education expenses such as tuition, fees and books, as well as certain room and board costs at eligible educational institutions.

  • You 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.

    You 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.

  • Contributors must have a modified adjusted gross income (AGI) less than $95,000 (single) or $190,000 (married), to make a full contribution of $2,000. The contribution limit is gradually phased out for individuals with AGIs between $95,000 and $110,000 (single) and $190,000 and $220,000 (joint). Individuals who contribute must designate someone else (the beneficiary’s parent or legal guardian) to have authority over the account.

  • The account’s earnings accumulate tax free, and distributions to pay for qualified education expenses (such as tuition, fees and books, as well as certain room and board expenses) are not taxable. Contributions are not tax deductible.

  • The deadline to make contributions to a Coverdell ESA is your 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 you choose. This fee is automatically deducted from your account each year, unless they pay the fee separately by check.