Coverdell ESA unused
I contributed the max for my children every year into Covberdell ESA’s and i invested it aggressively in individual stocks. I now have almost $300,000. It looks like one of my children may not attend school and the other is up in the air. If they dont ever go what can i do with this money? Am I stuck paying taxes and penalties?
Terry Says
Wow, that’s what you call a “mixed blessing” for sure! Congratulations on your investment success. If you withdraw for any other purpose than qualified educational expenses, you will be taxed at ordinary income rates– on top of your other income — and also pay a 10% penalty!
But there is no rush to withdraw. Leave it in there for a few years and maybe one or both of them will decide that college is a better option than the jobs market! Or you can transfer it to any other family member under age 30, or your spouse — or use it yourself to get an advanced degree! Read this article about the rules for transferring a Coverdell account.
