Jump-start a kid’s future with as little as $25/month.
Coverdell Education Savings Accounts (ESAs) are an ideal way to help a child, grandchild or any young person pay for education expenses.
ESA features at Star One
We kick fees to the curb wherever possible. No setup, administration or annual maintenance fees are charged on Star One ESA Accounts.
People also start an ESA because:
- Investment account can pay for qualified education expenses
Not just for college tuition, either. Coverdell ESAs can also be used in grades K-12—including home computer equipment, Internet access and tutoring. - Waiver of age limitations for children with special needs
The law allows contributions for individuals with special needs beyond age 18 and no mandatory pay-out at age 30. - Low barrier of entry
Start a savings account with a $100 minimum deposit or $25 with automated deposits. For Certificate Accounts, start with a $100 minimum deposit or $25 with automated deposits: 6-month, 1-year and 2-year terms.
** Annual Percentage Yield
Qualifications | The designated beneficiary must be an individual under the age of 18. The age-18 limitation will not apply to any designated beneficiary with special needs. |
Maximum Contributions | 2024-25 $2,000 per beneficiary. Note: Contributions do not count against the limits for IRAs. |
2024 Contribution Deadline | April 15, 2025 |
Tax Status of Earnings | Earnings grow tax-deferred. Tax-free on withdrawals toward qualified education expenses. |
Contribution Restrictions | Yes, 2024 and 2025 contributions phase out between $95,000 - $110,000 for single tax filers and $190,000 - $220,000 for joint tax filers. If income exceeds phase-out limit, contributions are not allowed. |
Tax Deduction | No. |
IRS Penalties for Early Withdrawal | None if:
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Distribution Restrictions | The child will not owe tax on any distribution from the account if it is equal to or less than the child’s qualified education expenses at an eligible educational institution for the year. Amounts distributed from an ESA that exceed the child’s qualified education expenses may be subject to income tax and to an additional 10 percent penalty tax. If the child does not need the money for education expenses, the assets may be rolled over or transferred to a qualified family member’s ESA or to a qualified tuition program (QTP). |
Required Distributions | Must be completed 30 days after beneficiary reaches age 30 (except for special-needs children) or death. |
Contribution Age Limit | Not allowed after attaining age 18 except for special needs children. |
Traditional and Roth IRA Accounts are separately insured to $250,000 by the National Credit Union Administration, an agency of the United States Government. Coverdell Education Savings Accounts are insured under the same provisions as irrevocable trust accounts.