Like a 529 plan, a Coverdell Education Savings Account also allow investment grow tax-deferred and can be spend for education expenses in qualified institutions nationwide including the primary and secondary school in addition to college and university education expenses. Now you can save for your kid's future education using this savings account and this is a great way to plan for your kid's higher education.

The Coverdell Education Savings Account is mainly designed as an Investment account to cover educational expenses only and it allows you to make an annual non deductible contribution to a particular Investment account. The beneficiary must be under 18 years of age when the ESA account is opened. The contribution limit formerly $500 per year was raised to $2,000 per year. This account will grow tax free and withdrawals from the account are also tax free. There are quite a few restrictions or limitations that apply to the Coverdell Education Savings Account that include: the contribution limit, contributor eligibility requirements, small maintenance fee irrespective of the low contribution limit, degree of control over the account and coordinating withdrawals with other benefits.

Advantages and disadvantages of ESA:
You can contribute to any child towards his/her Education Savings Account for education expenses. There are no such restrictions like beneficiary must be your child or in any other relationship. The contribution can be invested in any type of qualifying investment options available through the sponsoring institute and there is no limit for the number of Education Savings Account that you can establish for a child with the total contribution not exceeding $2,000. Also corporations, partnership firms or any other organizations can make contributions towards a child's education expenses in an Educational saving account. To a certain extent you can have control over the account, like you can also prevent your child from using the funds for something other than college expenses. You can also move funds from your child's ESA account to a 529 plan.

The beneficiary of the Coverdell Education Savings Account can receive tax free distributions to pay qualified education expenses and are tax free to a certain amount that not exceeding the beneficiary's qualified education expenses as such only a portion of the amount that exceeds the actual qualified education expenses are taxable. The Education Savings Account must be fully withdrawn when the beneficiary reaches the age of 30, if not the balance amount will be subject to tax with an additional penalty tax of 10% after 30 days. Many parents hold 529 plan accounts simultaneously with an ESA to maximize the savings and tax benefits.

Coverdell ESA providers:
There are a number of Coverdell Education Savings Account providers all over the country. You can directly contact any one of them and the annual maintenance cost of the ESA account is about $10 or less than that. An ESA can be established at any financial information that can hold an Individual Retirement Account. If you are associated with an Investment or Financial Advisor, then you can ask them to suggest an ESA provider. It is highly recommended to find answers and solutions for all your Investment options that are available to your child's educational expenses from a registered Financial or Investment Advisory Agency. There are a number of Investment Advisors and agencies are operating all over the country that offers a range of advisory services on this.