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I am unable to contribute to a Coverdell ESA due to the income limits. The following article discusses a way to get around this.

An excerpt is below:

Any individual may contribute a maximum of $2,000 a year to a Coverdell ESA for the benefit of any person under age 18. But the contribution limit is phased out for contributors with a modified adjusted gross income between $95,000 and $110,000 for single persons and between $190,000 and $220,000 for joint filers. (The phase-out is ratable, i.e., if you're single and your income is halfway between $95,000 and $110,000, then you can contribute $1,000 -- half of the maximum.)

But if you exceed those income limits, don't worry. Just give the money to the kid and let him open the Coverdell ESA himself. For example, let's say Jocelyn, a single person, wants to establish a Coverdell ESA for her favorite little guy, Spanky. But Jocelyn's AGI is $130,000. Her maximum contribution to little Spanky's Coverdell ESA would be ZERO, because of the income limitation rules. But there is no reason that Jocelyn can't make a $2,000 gift to Spanky, who can then open his own Coverdell ESA with $2,000, since he's well under the income limitations (assuming his lemonade stand doesn't rake in more than $95,000 a year).

Has anyone who exceeds the income limits done this? Would I open a new account and list my 4 year old as the account owner? I didn't think this was possible. Are there any rules regarding how the "gift" is given?

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