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Coverdell Education Savings Account
The Coverdell Education Savings Account, or CESA, is a nondeductible account that features tax-free withdrawals for a very specific purpose - a child's primary, secondary or post-secondary education expenses.
- Non-deductible account
- Tax-free withdrawals for a child’s primary, secondary or post-secondary education
- Unlike withdrawals from IRAs, distributions from this account are both penalty free and tax free
- 2009 Contributions
- Modified Adjusted Gross Income levels
- Single filers
- $95,000 or less: Full $2,000 contribution
- Between $95,000 and $110,000: Partial contribution
- $110,000 or more: No contribution
- Married, joint filers
- $190,000 or less: Full $2,000 contribution
- Between $190,000 and $220,000: Partial contribution
- $220,000 or more: No contribution
- Contributions are not aggregated with your traditional or Roth IRA contributions
529 Plan/College Savings Plan
College Savings Plans, also called 529 Plans, are investment plans designed by each state to help families save for future college costs in tax-advantaged accounts.
- Benefits
- Funds grow tax-free in the account and if the beneficiary uses the funds for a qualified education expense, the funds are federal tax-free upon withdrawal
- Contributor/owner may be eligible for tax deduction benefits at the state level, depending on the state’s plan.
- Funds are no longer part of the owner’s estate even though the owner retains control of the funds and can change the beneficiary.
- Eligibility
- Anyone can contribute to a College Savings Plan for any beneficiary.
- 2009 Contributions
- Up to $65,000 all in one year to a single beneficiary by using a special election that spreads the contribution for gift tax purposes over a five-year period during which that contributor can make no other gifts to that beneficiary without incurring gift
tax consequences.
- $65,000 amount is five times the annual gift tax exclusion amount, which is $13,000.
- Without the special five-year election, any individual can contribute up to $13,000 each year to any one beneficiary.
- Additionally, each state has a maximum limit for contributions. In most state plans, the limit is more than $200,000.
- Withdrawals
- Qualified higher education expenses
- Tuition
- Fees
- Books
- Supplies and equipment
- Room and board expenses, with limits based on the type of living situation
- Expenses must be required for the enrollment or attendance at an eligible higher education institution
- Most public and private colleges and universities
- Graduate schools
- Community colleges
- Junior colleges
- Area vocational and technical schools
- If distributions exceed the qualified expenses, the additional amount withdrawn is a non-qualified distribution
- Non-qualified distributions
- Any distribution other than those listed
- A ratio of contributions and earnings is withdrawn
- Earnings portion is subject to taxes and a 10% penalty
- Contact us for additional details
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Trust Representatives
Contact a CornerBank representative below to help secure your trust needs today!
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Gary L. McCutcheon
CFP®, MBA
Senior Vice President,
Asset Management
Winfield, Ark City, Douglass, Oxford, Wellington and Wichita |
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Barbara J. Braa
MBA, Vice President,
Trust Officer
Lawrence |
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Brian K. Dutton MBA,
Assistant Vice President, Asset Management
Winfield, Ark City, Douglass, Oxford, Wellington and Wichita |
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Jeffery Wacker
Assistant Vice President,
Asset Management
Winfield, Ark City,
Douglass, Oxford, Wellington and Wichita |
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