Coverdell Education Savings Accounts - A Coverdell ESA is a trust or custodial account set up in the United States solely for the purpose of paying qualified education expenses for the designated beneficiary of the account. The designated beneficiary must be under the age of 18 when the account is established. Any balance in a Coverdell ESA must be distributed within 30 days after the date the beneficiary reaches age 30. These age limits do not apply to beneficiaries with special needs.

There is no limit to the number of Coverdell ESAs that can be established for one beneficiary. However, total contributions made to all Coverdell ESAs for any beneficiary in one tax year cannot be greater than $2,000. The contributions are not tax deductible. For information on how to determine the part of any distribution that is taxable earnings, refer to Publication 970, Tax Benefits for Education.

IRA Withdrawals - Withdrawals can be made from an IRA or the new Roth IRA by persons under the age of 59 1/2 without the 10% early withdrawal penalty if the funds are used to pay higher education expenses. Visit www.irs.gov/ for details.

Qualified Tuition Programs:

Distributions from state tuition savings programs (typically referred to as 529 Savings Accounts) and prepaid tuition plans are tax-free for federal income tax purposes if withdrawals are used for qualified education expenses. An individual who establishes an account may select himself or herself as the account owner, designating the ability to control the account by selecting investment options, changing a beneficiary of the account, and approving distributions to the beneficiary. Refer to IRS publication 970 or inquire about tuition savings and pre-paid tuition plans offered in your state.