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Coverdell Education Savings Account [College Savings Plan] - YouTube
Channel: Travis Sickle
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In this video I'm going to talk about
6 tips about the Coverdell education
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savings account that you probably didn't
know but you should know because this is
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a very powerful savings vehicle for a K
through 12 and college planning but
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before we get into it if ithis is your your first time at our channel or you haven't
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subscribed click on the subscribe button
at the bottom my name is Travis Sickle
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certified financial planner helping you
reach your financial goals
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so before we get into it let me know in the
description at the bottom which savings
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vehicle you're using for college planing
or K through 12 or which one you're
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planning on using in the future alright
let's go ahead and jump right into it so
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tip number one the income limits know
the income limits but also know how to
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get around them so the income limits for
the Coverdell education savings account
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is a hundred and ten thousand if you're
single and two hundred and twenty
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thousand if you're married filing
jointly so if you're above those
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thresholds then you can't use the
Coverdell education savings account
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directly but there are some loopholes to
get around this you can use somebody
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else to make those contributions into
the Coverdell ESA such as your
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grandparents so grandparents of the
beneficiary can also make the
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contributions a friend or relative
anybody else who meets those income
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requirements can contribute into a
Coverdell ESA with the beneficiary being
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your child so that's one way to get
around it another way is using either a
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trust or an organization now you might
not want to go set up a trust just to
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make the contribution into the cupboard
l to get the tax savings but you can
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also use a small business so any
organization or trust doesn't have any
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income limits so they can make the
contribution no matter how much money
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that they're making so it's a little bit
of a loophole in order to get the money
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into the Coverdell ESA so if you have a
small business you can also make that
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contribution now as a side note if your
beneficiary also has earned income they
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can make the contribution as well just
something that you should know tip
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number two and this is probably one of
my favourite ones about
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these tips about the Coverdell ESA or
the investment options they're basically
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unlimited you can invest in any stocks
or bonds ETFs or mutual funds now this
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gets compared to the 529 plans which are
limited to the investments in that
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particular 529 plan so depending on
which plan you choose will depend on
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what availability that you have on those
particular investments know if that's
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overwhelming to you that's okay too
because you can use a third party money
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manager have a model portfolio use a
target date fund there are plenty of
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options inside of the covered LTS a that
you can use to streamline your
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investments as well so don't get too
overwhelmed because they're unlimited
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but just know that you have access to
build a customized portfolio inside of
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the Coverdell ESA tip number three
computers and the internet so you can
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actually pay for the computer or the
internet service for K through 12
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with the cupboard LTS a now I point out
K through 12 you can also do this for
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college planning but this is what's
different from the 529 plan so the 529
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plan can only be used for college for
those expenses for K through 12 the 529
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plan is limited to just tuition so this
expands it with using the Coverdell ESA
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to use for computers or Internet in K
through 12 so here's how the rule reads
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it says the purchase of the computer a
peripheral equipment computer software
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fiber optic cables related to computer
use or Internet access and related
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services is a qualified elementary or
secondary education expense if it's to
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be used by the beneficiary and the
beneficiary's family during any of the
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years the beneficiary is in elementary
or secondary school now I find that kind
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of interesting that they even bother to
point out that the rest of the family
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members can actually still use the
computer and qualify to use the money
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when it's coming from the Coverdell ESA
it's kind of ridiculous like of course
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somebody else is going to touch this
computer at some point but I guess they
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just wanted to stick it in there like
you're going to get audited and they're
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gonna go through your browsing history
or something it's ridiculous but anyways
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the nice ad
benefit to use the covered LTS a tip
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number four you can use the Coverdell
ESA for academic tutoring for K through
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12 now that's kind of nice that you can
pay for academic tutoring with these
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dollars so you're still getting that tax
benefit from the growth in able to pay
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for the academic tutoring which is not
something that you could have done with
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the 529 plan so this is an added benefit
that I see with the Coverdell ESA so if
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you want to do tutoring or if you think
that you're going to use it for academic
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tutoring it's just another added benefit
of why you should look at the Coverdell
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ESA tip number five so above and beyond
what we just talked about number four
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for the academic tutoring you can also
use a covered LTS a to pay for books
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supplies and equipment for K through 12
now again the 529 plan only for tuition
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so the 529 plan can only be used for
tuition up to ten thousand dollars on an
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annual basis for K through 12 so pay for
these extra costs you can use the
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Coverdell ESA tip number six know the
contribution deadlines now the Coverdell
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ESA has a contribution deadline of April
15th so if your tax filing deadline now
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those contributions for April 15th can
still be made for the previous tax year
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so if it's April 15th of 2020 you can
still make those contributions for 2019
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now the 529 plans are a little bit
different some of them or actually most
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of them have a 1231 deadline but some of
them do go to April 15th and some of
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them even go further than that with the
deadlines so you need to look at your
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particular 529 plan if you have one to
see what those deadlines are but the
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Coverdell ESA
is April 15th so if you need to make a
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last-minute contribution you still can
do the same rules as both the
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traditional and Roth IRA deadlines and
those are the six tips on the Coverdell
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ESA that you should know if you didn't
know already now if you want to learn
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more about the cupboard LTS a I did a
previous video on the Coverdell that'll
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need a link on the description at the
bottom so you can learn a little bit
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more and if you've enjoyed this video be
sure to subscribe and leave your
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comments down at the bottom
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