Coverdell Savings Account (ESA), withdraws for previous year, transfer part of account

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rarvesen
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Coverdell Savings Account (ESA), withdraws for previous year, transfer part of account

Post by rarvesen » Tue Feb 05, 2019 3:28 pm

I have a Coverdell Savings Account (ESA) and have several questions:

1) Do you know if can withdraw for education expenses for previous years? Example, had account since 2015, had expenses in 2017, can withdraw be made in 2019?

2) Is there any overlap in the years and taking out funds? For example, if I had education expenses in November 2018, can take withdraw in February 2019?

3) Can part of the account be transferred to another child? For example, have one account for Child-1, Child-2 does not have an account, can transfer 50% of the account from Child-1 to Child-2?

Thanks.

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Bruce
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Re: Coverdell Savings Account (ESA), withdraws for previous year, transfer part of account

Post by Bruce » Tue Feb 05, 2019 11:39 pm

“The designated beneficiary of a Coverdell ESA can take a distribution at any time. Whether the distributions are tax free depends, in part, on whether the distributions are equal to or less than the amount of Adjusted qualified education expenses (defined later) the beneficiary has in the same tax year.”
https://www.irs.gov/pub/irs-pdf/p970.pdf Page 45

There is more detail to your other questions in that section,

Transfers can be made to another family member, restrictions are explained in the same IRS document

I am a fan of the Coverdell ESA, and find them a useful tool for college savings.

Unfortunately Vanguard is not allowing new ones to be opened, and steers you to their 529 accounts instead.

Wiki has more info at https://www.bogleheads.org/wiki/Coverde ... s_Accounts


Regards
Bruce | | Winner of the 2017 Bogleheads Contest | | "Simplicity is the master key to financial success."

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