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Ok, if Mr.Bess and I take the first 10k in the extra money and put it aside for private school for the 2003-2004 school year (and the school is 10k for one year) instead of for a new house, would there be any benefit to putting 2k in a Coverdell educational IRA? For such a short amount of time, would the tax benefit be worth it?

Well, every penny counts, even when there aren't many of them. I would check a couple of things first:

1. Are there any fees involved that would more than eat up the tax-free earnings?

2. When these accounts were invented, as Education IRAs, they were solely for post-secondary education. They've now been expanded, but my cursory look through Pub 970 finds everything written from the standpoint of the beneficiary making withdrawals. In your case, this would be your daughter, which raises issues of minors having the ability to do things. I'm not saying that it would be a problem, but it's something I think you should check out with the custodian of the account.

Phil Marti
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