The Education IRA has been renamed to the Coverdell Education Savings Account (or "Coverdell ESA"). The Coverdell ESA was created to give individuals a method to save for a child's education (both elementary/secondary education (k-12) and post-secondary education (college, graduate school, vocational school, etc.)) and may be established for the benefit of any child under age 18.

Eligibility requirements

• The account must be established for the benefit of a child (designated beneficiary) under the age of 18. Contributions to the account will not be accepted after the designated beneficiary reaches his or her 18th birthday, unless the beneficiary is a special needs beneficiary.
• You may contribute up to $2,000 annually to a child's Coverdell ESA if your modified adjusted gross income (see table below) is less than $95,000 as a single tax filer, or $190,000 to $220,000 as a married couple filing jointly in the tax year in which you contribute. The $2,000 maximum contribution limit is gradually reduced if your modified adjusted gross income exceeds these limits.
• Anyone may contribute to a child's Coverdell ESA, as long as his or her income falls within the income guidelines and the total of all contributions for one beneficiary does not exceed the $2,000 limit.

Annual contribution limits

• $2,000 per child (designated beneficiary of the account).

Contribution timing

You can make annual contributions to a Coverdell ESA from January 1st through the tax-filing deadline (excluding extensions) for the year, generally April 15.

Tax advantages

All earnings in the account accumulate on a tax-deferred basis and can be withdrawn from the account tax-free if used to pay for qualified education expenses.

Distribution guidelines

• To avoid taxes and penalties on earnings, distributions must not exceed the amount of qualified education expenses for the year in which they are taken.
• All funds in the account must be distributed to the designated beneficiary 30 days after his or her 30th birthday, unless the beneficiary is a special needs beneficiary. If the assets are not going to be used for the designated beneficiary after he or she attains the age of 30, the balance of the account can be rolled over to a Coverdell ESA for another designated beneficiary who is also a qualified family member under the age of 30.

The annual amount you can contribute to a Coverdell ESA is dependent on your modified adjusted gross income as determined on your federal income tax return. The following table should help you determine whether or not you are eligible to contribute to a Coverdell ESA:

Edison Credit Union offers products that may be used to fund a Coverdell ESA. Ask an ECU Member Service Representative for more details about Market Rate CDs.