Education savings accounts offer tax-advantaged savings for parents to use for their child’s education. These plans are commonly called Coverdell Education Savings Accounts, and funds can be used to pay for qualified educational expenses such as tuition, books, uniforms, etc.
To qualify, you do not need earned income. However, the beneficiary of the account must either be under the age of 18 or an individual with special needs. You must also open an ESA with a cash deposit.
Benefits of a Education Savings Account (ESA)
No need to make yearly contributions
Contributions are not tax-deductible
Earnings grow on a tax-free basis as long as they are less than the account holder’s qualified educational expenses
Qualified expenses for educational purposes
Exceptions are available for individuals with special needs
A self-directed education savings account provides account owners the freedom and flexibility to acquire alternative investments to build additional capital towards education. If you have an existing ESA, those funds can be transferred or rolled over into a self-directed plan.