Coverdell ESA rollovers are tax-free when the funds are rolled over to another Coverdell ESA within 60 days of the distribution. Like 529 plan rollovers, Coverdell ESA owners may only make one rollover in a 12-month period.

How many Coverdell accounts can I have?

Contributors must contribute by the due date of their tax return (not including extensions). There’s no limit to the number of accounts that can be established for a particular beneficiary; however, the total contribution to all accounts on behalf of a beneficiary in any year can’t exceed $2,000.

Can you change the beneficiary of a Coverdell?

You can change the beneficiary of a Coverdell education savings account to a different family member. The existing beneficiary is under 30 years of age. The new beneficiary is under 30 years of age. The new beneficiary is a member of the existing beneficiary’s family.

Who owns a Coverdell account?

Coverdell ESA
While your child is the beneficiary of the Coverdell ESA, you are the owner of the account. Although you must use the funds to cover your child’s educational expenses, your kiddo does not get control of the fund at any point.

Roll it over: You can roll over unused Coverdell money to another account for an eligible family member, or you can change the beneficiary for the current account. You can also transfer it to a 529 plan, which is a qualified distribution, to avoid the tax penalty.

Can you transfer a Coverdell ESA to a sibling?

You can’t switch the beneficiary of the Coverdell to just any child. The student has to be a member of your family. Coverdell rules also count your first cousins, nieces, nephews and in-laws all as family members eligible to receive Coverdell transfers from you. You can also transfer these funds to your spouse.

Can you rollover a Coverdell to an IRA?

No. The 529 and Coverdell College Savings accounts are funds that are only for qualified education expenses. A 529 is a tax-advantaged savings account. The dollars are intended for education expenses, and typically can’t be rolled over to an IRA.

When do Coverdell funds have to be transferred to another account?

If funds remain unused, they must be distributed to the named beneficiary on the account by 30 days after the child’s 30th birthday. To avoid this, the IRS permits the funds to be transferred into another Coverdell ESA for someone related to the first beneficiary, who is under 30 years of age.

When was the Coverdell education savings account created?

The Coverdell ESA was originally introduced in 1997 as the Education IRA. In 2001, Congress expanded its benefits and renamed it the Coverdell Education Savings Account (ESA).

How can I rename a Coverdell account beneficiary?

You can rename the beneficiary as part of a rollover, or simply redesignate the beneficiary by contacting the financial institution where the Coverdell account is now maintained and filling out whatever paperwork they require.

Can you borrow from a Coverdell retirement plan?

Unlike certain employer-sponsored retirement plans, you aren’t allowed to borrow from a Coverdell account. You must empty your Coverdell before you turn 30 years old. The only exception is if the beneficiary of the account is a special needs beneficiary.