# A B C D E F G H I J K L M N O P Q R S T U V W X Y Z
Coverdell Education Savings Account

The Coverdell Education Savings Account (formerly known as the Education IRA) is a creation of the Taxpayer Relief Act of 1997. As the name implies, it's tailor-made for college savings.

You can usually contribute up to $2,000 per year to an Education Savings Account, possibly less depending on your income. A child can only be "funded" by $2,000 per year, though. So you and grandma cannot each invest $2,000 in an Education Savings Account for your son each year.

You can invest the Education Savings Account in just about anything, and although you pay taxes on contributions, withdrawals are tax-free.

The recipient (the child going to college) technically controls how the money is spent, but he or she can only use it for education. If he/she doesn't use the money, you can transfer the account to a relative who will use the money for education.

The Education Savings Account is a good choice for anyone who qualifies. However, saving just $2,000 per year for college may not get your kid very far. As a result, the Education Savings Account should only be one part of your college-saving plan.

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