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IRAs, Education and Health Savings Accounts
Educational Savings Accounts
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There is an annual limit per beneficiary and contributions are nondeductible. Qualified distributions are tax-free and virtually anyone can contribute. Contributions must stop at beneficiary's 18th birthday. Contributions may be permitted after age 18 for special needs children. Funds must be disbursed or rolled over by beneficiary's 30th birthday.
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All distributions or earnings are tax-free and can be withdrawn at any time, if they are used for qualified education expenses. Any balance remaining in the account when the beneficiary turns 30 must be distributed or rolled over to a new account for the benefit of another family member. If the balance is not distributed or rolled over, the earnings portion is included in income and is subject to a 10% penalty tax.
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The responsible individual can withdraw funds at any time. To avoid tax consequences from the withdrawal, you must use the funds to pay for qualified expenses for your child before he or she reaches age 30.
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An Education Savings Account must have one "responsible individual" to oversee the account. This person decides when funds will be withdrawn. You can be the "responsible individual" as long as you are a parent or legal guardian of the child.
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What better gift could you give a child than the gift of education? Open an Education Savings Account with us today and enjoy the satisfaction that comes from knowing you have contributed to a brighter future.
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