North East Welch Federal Credit Union

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Education Savings

collegesavingspigCoverdell Education Savings Account

The Coverdell Education Savings Account is used to pay for qualified elementary, secondary and higher-education expenses of the child named on the account. The account is set up and reported under the child’s Social Security number. Any one can open a Coverdell for a child and contribute the full $2000 per year if they do not meet the Modified Adjusted Gross Income limit. A child may have more than one Coverdell Education Account but the maximum aggregate contribution is $2000 per year. Each Account has a designated “responsible person” to oversee the account. Earnings accumulate tax-free and withdrawals are tax-free if used for education expenses by the time the person is 30 years of age. 

If the funds in the Coverdell ESA are not used by the child, the Coverdell ESA may be rolled-over to another person’s Coverdell ESA within the same family. Family members include spouses, siblings, stepsiblings, nieces nephews, first cousins, parents, aunts, uncles, grandparents, children and grandchildren.