This non-educational account (and irrevocable gift) can bring additional opportunities to the family.
1. For Coverdell Education Savings accounts, the earnings portion of distributions that are used for non-qualified education expenses are subject to ordinary income tax, plus a 10% penalty.
2. Section 529 plans are established by various states and offered to residents of all states, depending on the laws of the customer’s home state. Favorable tax treatment may be limited to investments made in a Section 529 plan offered by the customer’s home state.
3. Qualified earnings withdrawals from a Roth IRA account are not subject to income tax, provided you’re at least 59 1/2 and you’ve held the account for five years.
It is not our position to offer legal or tax advice. Consult a legal or tax advisor regarding this information as it relates to your personal circumstances.