Frequently Asked Questions
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Coverdell
3. What is a qualified expense?
     

A qualified expense is one that is required for the enrollment or attendance at an educational institution.  Unlike the other popular education savings plans under Internal Revenue Code Section 529, distributions from CESA’s can be used to pay qualified education expenses for elementary and secondary education (K-12) in addition to higher education.

These expenses may include:

  • tuition
  • fees
  • books
  • supplies
  • equipment
  • academic tutoring
  • special needs services
  • room and board
  • uniforms
  • transportation
  • educational computer technology/ equipment
  • Internet access

 
1. What is a Coverdell Education Savings Account (CESA)?
2. How much can be contributed for each child in a given year?
4. Who may contribute to a Coverdell Education Savings Account?
5. Other than the Financial Organization, who are the parties involved in the CESA?
6. Am I allowed to change the beneficiary?
7. Do I have to pay taxes on the account earnings?
8. Who is a member of the family?
9. Can fund be rolled over from one CESA to another CESA established for another family member?
10. Can a CESA be rolled over to a 529 College Savings Plan?
11. Can funds from a Qualified Tuition Plan (529 Plan) be rolled over to a CESA?
12. How long can you make CESA contributions for the Designated Beneficiary?
13. What is the deadline for CESA contributions?
14. Why is the age 30 important?
15. Does the Designated Beneficiary get control of the money when he or she reaches the age of majority?
16. Do CESA’s mirror IRA’s in that the Contributor needs to have earned income?
17. What happens if the funds are not used for education purposes?
18. What happens if the annual contributions for a child exceed the $2,000 limit?
19. Are transfers between CESA’s non-reportable as they are with IRA’s?
20. What reporting is required to the financial organization in the case of a trustee-to-trustee transfer?
21. Will the CESA prevent me from taking advantage of other education savings options?
22. What are the tax consequences if the Designated Beneficiary doesn’t need the money because they have received a scholarship?
23. Are contributions to a CESA tax deductible?
24. What does the age waiver for a special needs beneficiary entail?
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