Coverdell ESA in my name or child?

[dandan14]

Anyone have any insight on the smartest way to title a Coverdell ESA account?

Should it be in my name with my children as beneficiaries or should it be in their names?
Are there pros/cons to each? (For example, will having it one way or the other make it easier to spend, impact financial aid, etc.)

[sscritic]

Don't forget the key issue: are they dying before you or after? What is in their wills?

[dandan14]

Don't forget the key issue: are they dying before you or after? What is in their wills?

Are you asking what happens if the child dies? I've never considered that.
I know that it is easy to change the beneficiary of 529s. I'm not sure how it works on an ESA.

The other issue of course is how ESAs will be treated in 2013 and thereafter. But since they do allow a ESA to 529 rollover, I figure there is no harm in funding it.

[sscritic]

Don't forget the key issue: are they dying before you or after? What is in their wills?

Are you asking what happens if the child dies? I've never considered that.
I know that it is easy to change the beneficiary of 529s. I'm not sure how it works on an ESA.

I am fixated on my estate at this point in my life. If you make your children the owners, then it doesn't matter if you can change the beneficiary on an account you own; the issue is what happens to an account they own. Ownership vs beneficiary on a 529 is a hot topic around here. Owner and beneficiary are not the same word; I thought that was the focus of your question.

[dandan14]

Don't forget the key issue: are they dying before you or after? What is in their wills?

Are you asking what happens if the child dies? I've never considered that.
I know that it is easy to change the beneficiary of 529s. I'm not sure how it works on an ESA.

I am fixated on my estate at this point in my life. If you make your children the owners, then it doesn't matter if you can change the beneficiary on an account you own; the issue is what happens to an account they own. Ownership vs beneficiary on a 529 is a hot topic around here. Owner and beneficiary are not the same word; I thought that was the focus of your question.

Yes, it was. But I suppose I was looking at it more from a standpoint of flexibility down the road, impact on financial aid eligibility, etc.
From what I've found so far, it seems that having the accounts in my name with them as the beneficiaries makes sense.

On my 529, I actually have myself as the beneficiary and plan to make my children beneficiaries when they get near college age.

[dandan14]

Oddly enough, ESA was not an option when I tried to open it on Vanguard's site. I called them and they said they have stopped doing them.
So I'm setting up at Scottrade instead.

[sscritic]

I am sorry I put this thread off on a tangent. Well, only a little sorry. I don't know about how they are treated for financial aid, which I think is your main question. Estate and gift taxes should be a secondary concern. With respect to which, the law says:

(3) Special rules for applying estate and gift taxes with respect to account
Rules similar to the rules of paragraphs (2), (4), and (5) of section 529 (c) shall apply for purposes of this section.
...
(6) Change in beneficiary
Any change in the beneficiary of a Coverdell education savings account shall not be treated as a distribution for purposes of paragraph (1) if the new beneficiary is a member of the family (as so defined) of the old beneficiary and has not attained age 30 as of the date of such change.

(7) Special rules for death and divorce
Rules similar to the rules of paragraphs (7) and (8) of section 220 (f) shall apply. In applying the preceding sentence, members of the family (as so defined) of the designated beneficiary shall be treated in the same manner as the spouse under such paragraph (8).

http://www.law.cornell.edu/uscode/text/26/530

A change of beneficiary from you to a child (not "assigned to the same generation as (or a higher generation than) the old beneficiary ") means that the gift tax rules apply (paragraph 5 of section 529c).

Maybe someone else will comment on the financial aid part. I would think that savingforcollege and similar sites would also have information.

[umfundi]

Anyone have any insight on the smartest way to title a Coverdell ESA account?

Should it be in my name with my children as beneficiaries or should it be in their names?
Are there pros/cons to each? (For example, will having it one way or the other make it easier to spend, impact financial aid, etc.)

Is there a reason you would prefer a Coverdell to a 529? Or, how about a Roth IRA in the child's name?

Keith