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Coverdell Educational Savings Accounts
formerly known as the Educational IRA


Coverdell Educational Savings Accounts
Formerly known as the Educational IRA, this is an ideal savings plan for parents, grandparents, relatives or friends who wish to start an investment program to meet a child's future needs. Unlike the traditional IRA or Roth IRA, a contributor to a Coverdell Educational Savings Account is not required to have earned income. In fact, too high of an income will reduce the maximum amount that may be contributed to these accounts.

Eligibility Limits
Contributions are based upon the contributor's marginal adjusted gross income. In order to calculate the amount of the contribution:

1. To be eligible for a full $2,000 contribution, an individual's marginal adjusted gross income must be less than $95,000-$110,000 or the $2,000 contribution amount will be lowered based upon an IRS formula. To be eligible for a full $2,000 contribution, a married couple's marginal adjusted gross income must be less than $190,000-$220,000 or the $2,000 contribution amount will be lowered based upon an IRS formula.
2. Contributions are not tax deductible.
3. The contributor does not need to be related to the beneficiary (i.e. student).
3. Contributions may only be made for students under age 18.
Benefits of Making Coverdell Contributions

1. Contributions and earnings are allowed to accumulate tax-deferred. Like a Roth IRA, however, contributions are made with after-tax dollars.
2. Distributions taken from the Coverdell Education Savings Account are not subject to federal income taxes or penalties if they are used for the purpose of paying qualified education expenses at any eligible institution including qualified elementary and secondary schools.
3. Assets not used by the beneficiary (i.e. student) may be rolled over to another Coverdell Education Savings Account for the benefit of an eligible family member under age 30. The rollover must be completed within 60 days from the date of the distribution.
Qualified Educational Expenses

1. Books
2. Tuition
3. Equipment
4. Supplies
5. Room
6. Board

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Non-Qualifying Distributions
These are generally considered distributions or withdrawals in excess fo qualified primary and secondary education expenses. The portion of the distribution in excess of those expenses may be subject to federal income tax and a 10% federal income tax penalty.

Maximum Age Limitations
Upon attaining age 30, a student must distribute any remaining money in his or her Coverdell Education Savings Account. Distributions may be subject to federal income tax and a 10% federal income tax penalty. However, a distribution may be rolled into a new Coverdell Education Savings Account for the benefit of eligible family members within 60 days of the date of distribution. These rollovers would not be taxed as a distribution.

Shoreline's Competitive Edge
Whatever your college savings needs, Shoreline Wealth and Investment Management can assist you in obtaining the best investment management and services available.

For more information:
If you'd like more information about how diversified investment advisors can help you achieve your financial objectives through personalized wealth or retirement and risk management strategies, please contact us. We welcome the opportunity to discuss your unique needs and how we may best meet them.

This page (formatted for versions 4.0 and higher of Netscape or MSIE) is updated regularly so check in from time-to-time to see new articles and updates. You can click on any underlined words on each page to see a specific wealth management topic in the left margin of each page.

For more information:
If you'd like more information about how diversified investment advisors can help you achieve your financial objectives through personalized wealth or retirement and risk management strategies, please contact us. We welcome the opportunity to discuss your unique needs and how we may best meet them.

This page (formatted for versions 10.0 and higher of Internet Explorer) is updated regularly so check in from time-to-time to see new articles and updates. You can click on any underlined words on each page to see a specific wealth management topic in the left margin of each page.

Charles M. Bloom, Registered Principal offers securities and advisory services through Centaurus Financial, Inc. - Member FINRA and SIPC - 775 Avenida Pequena, CA, 93111 (mailing address: 3905 State Street Suite 7173, Santa Barbara, CA, 93105) - CA Life Insurance License No. 0A52786 - Centaurus Financial, Inc. and Shoreline Wealth & Investment Management are not affiliated companies.

The information contained in this web site is neither an offer nor solicitation of any security or service.

 
 

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  Shoreline Wealth and Investment Management Phone: 800.329.4820 - Fax: 805.456.3806 - E-Mail: cbloom@cfiemail.com