Today it takes a college degree to get the job you could get with a high
school diploma twenty-five years ago. Do you have a child or grandchild
or are you concerned about helping another child pay for college? Anyone
can establish an account for a child and invest money for that childs
education. These programs using fixed insurance products can be used by
persons at every economic level.
Coverdell Education Savings Account
The old Educational IRA has gotten a bit of a makeover, and now it's called
the Coverdell Education.
tax laws have made this plan much more attractive. When saving for a child's
post-secondary education, you can now contribute up to $2,000 per year
(per child) until the child is age 18. This is significantly higher than
the old limit of only $500. Contributions are not tax deductible. However,
withdrawals from the account are completely tax free, including earnings,
when withdrawn to pay for qualified education expenses. (Remember that
this is somewhat similar to a Roth IRA: after-tax going in, tax-free coming
Who Can Contribute and How Much?
Anyone can contribute to a Coverdell Education Savings Account as long
as their income does not exceed certain limits (see below). Keep in mind,
however, that the $2,000 per year limit is PER CHILD, regardless of the
number of contributors or donors. For example, if a grandparent contributes
$1,200 for a child, the parent could not contribute more than $800 for
the same child.
The Coverdell Education Savings Accounts will have a "manager"
(often the parent) who will need to monitor contributions for the beneficiary
(child) to help insure there are no excess contributions. Like Traditional
IRA's, excess contributions over $2,000 are subject to a 6% federal tax
A donor may be limited as to the amount of their contribution if their
modified adjusted gross income exceeds $95,000 for single filers, or $190,000
for joint filers. Contribution amounts are gradually phased out between
the incomes of $95,000 and $110,000 for single filers and $190,000 and
$220,000 for joint filers. Persons with income amounts above $110,000
(single) and $220,000 (joint) would not be able to contribute to a Coverdell
Education Savings Account.
How Long Can Benefits Stay In the Account? The funds can remain in the
account until the beneficiary turns age 30. Any remaining funds could
be rolled over to an another qualified family member (see next section).
Any funds left and not rolled over by age 30 would be taxable to the beneficiary.
In addition, because the funds were not used for educational purposes,
there would also be a 10% penalty.
can be made from an existing Coverdell Education Savings Account to a
new Coverdell Account if the new beneficiary is a member of the original
beneficiary's family. Family members would include: Grandparents, Parents,
and Spouses, Brother and Sisters, Children and their Spouses, Stepchildren
and their Spouses. This could be particularly helpful if a family had
several children. Example:The oldest child in a family had a Coverdell
Education Savings Account and decided not to attend college. Their account
could be rolled to his brother or sister as long as it was done prior
to the oldest reaching age 30.
Suppose a beneficiary does not use all the money in his account and has
children prior to reaching age 30. Remaining funds could be rolled to
that original beneficiary's child(ren) prior to the beneficiary reaching
age 30. One could also rollover an existing Coverdell Education Savings
Account to another existing Coverdell account for the same child.
Neither American National nor its agents
provide legal or tax advice. Please consult your attorney or tax advisor
for your specific situation.
National Insurance Company,
American National Property And Casualty Company,
(ANPAC®) Springfield, MO
coverages, and options are not available in all states, and eligibility
requirements will apply. Products and services referenced in this Web
site are provided through multiple companies. Each company has financial
responsibility only for its own products and services, and is not responsible
for the products and services provided by the other companies.
Personal lines and commercial products and services are made available through American National Multiple Line Exclusive Agents and may be underwritten by American National Property And Casualty Company (ANPAC®), Springfield, Missouri, or one of its subsidiaries or affiliates: American National General Insurance Company; Pacific Property And Casualty Company (California residents); ANPAC Louisiana Insurance Company (Louisiana residents); American National Lloyds Insurance Company and American National County Mutual Insurance Company (Texas residents). Life insurance and fixed annuity products are issued through American National Insurance Company, Galveston, Texas.
Income products and services are issued by Illinois Mutual Life Insurance
Company, Peoria, Illinois.
Tax issues that may be discussed
are subject to change, and this is for your information only. Discussion
of such issues does not constitute tax or legal advice. Please consult
your tax advisor, attorney or CPA for guidance on all tax matters.
descriptions of coverages available are for illustration purposes only,
and are not intended as a statement of contract. For actual terms and
conditions of coverage provided, refer to your insurance policy. For more
information about coverage options and availability, talk to your American
National agent. American National Family of Companies reserves the right
to discontinue programs at any time.
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Company, its subsidiaries or affiliates. Such links do not imply endorsement
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its subsidiaries or affiliates.