Coverdell IRA Retirement Plans

The Coverdell Education Savings Account, ESA retirement plan, was created to allow people to save for qualified education expenses for a designated beneficiary only. To contribute to an ESA, the modified adjusted income necessary to contribute is $110,000 for single filer or $220,000 if filing jointly.

For creating and funding a Coverdell ESA retirement plan, the following guidelines are necessary to consider:

1. The trustee or custodian must be a bank or other entity approved to provide this financial service,
2. The plan documents must have the following parameters:
   • All contributions need to be made in cash.
   • Contributions must be made on behalf of the designated beneficiary if her/she reaches age 18 or if they have special needs.
   • All contributions for a beneficiary cannot exceed $2,000 for a given year.
3. No investments can be made to life insurance contracts.
4. The money of the account cannot be combined with other property except in a common trust fund or common investment fund.
5. The entire balance must be distributed within 30 days of the following events:
   • The beneficiary is 30 years old, unless they have special needs.
   • The beneficiary's death.

It is important to note that qualified education expenses are necessary for enrollment or attendance for the designated beneficiary at an eligible institution. Expenses include qualified higher education, secondary or elementary education costs.

To distribute funds from an ESA retirement plan, note the following:

Finally, once a designated beneficiary completes their education or do not attend a school that qualifies for ESA distributions, the funds may be transferred to members of the beneficiary's family. There will be no taxes associated if the new beneficiary is under age 30 or has special needs.