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My wife and I have been contributing to a Coverdell ESA for our two children since they were born. Still toddlers, we recently tipped out of the Married Filing Jointly limit.

What other options exist for us to continue contributing here?

Options I’ve been told include
- Open a bank account in child’s name, gift them the contribution, they they legally transfer to the account

- Gift money to grandparents who then contribute to account

Appreciate any insights.
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If you can trust the grandparents (not everyone can), then I would give them the money to put into a 529 plan that they own with your child as a beneficiary.
Grandparent owned 529 will not count as an asset on FAFSA- but a distribution from them will count as untaxed income, so best to use the funds from a grandparent-owned 529 later in their college career so that by the time the "income" would show up, they aren't doing FAFSA anymore.

If you want to stick with Coverdell - or at least continue to put money in it - your child can contribute to their account with money you've given them. - Assuming they don't have over $95k in adj gross income :)
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Anyone can contribute to a coverdell up to $2k per year per child. so it is not a problem :)
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Anyone can contribute to a coverdell up to $2k per year per child. so it is not a problem :)

It is limited to $2k TOTAL per year from ALL sources for any given child.
(I think people could misinterpret your statement and think that a grandma and an uncle and ... could each contribute $2k in 2021 to benefit a single child - which isn't true.)
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Much appreciated!

I have 529 plans going, but prefer Coverdell maxed because of advantages it offers for that $2K

We tripped the contribution limit for married filing jointly, so we can’t directly contribute.

Additionally, Schwab told us that they weren’t sure we could contribute to a ESA using a child’s UTMA account.

I have read that TD Ameritrade is okay with it.

I was thinking the gift to child via custodial account would be easiest, given the conversation with grandparents might come off awkward.
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Yep $2k max per child not per person giving money.

I try to phrase things correctly! :)
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I was thinking the gift to child via custodial account would be easiest, given the conversation with grandparents might come off awkward.

They can deposit the funds right into the account directly.
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Additionally, Schwab told us that they weren’t sure we could contribute to a ESA using a child’s UTMA account.
Open a checking account for the kid.
My credit union you can open a student checking account and it's free. (They even give you $50 for opening the account and another $50 if you use the debit card 3x)

Once the checking account is opened, I expect Schwab will take the check. (probably also will take an electronic transfer from it)

given the conversation with grandparents might come off awkward.
Because you don't want them to know how much you've been making?
Or because you think they'd jump to conclusion that you're asking for money?
Or because money is one of those things you just don't talk about in your family?
(feel free to not answer if you don't want to)

I have 529 plans going, but prefer Coverdell maxed because of advantages it offers for that $2K
I think there's really only 1 advantage anymore - that you can invest in exactly what you want.
But there are a lot of good options for 529 investments.
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I have 529 plans going, but prefer Coverdell maxed because of advantages it offers for that $2K
I think there's really only 1 advantage anymore - that you can invest in exactly what you want.
But there are a lot of good options for 529 investments.


Agreed, do both. Why don't they let you invest more in a Coverdell but do so for 529s? Investment firms making deals with the Government perhaps? :)
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