2

My children are fortunate enough to be gifted money each year by their grandparents for their birthdays. The grandparents want the money placed in each child's Coverdell ESA, but they give the money by giving us checks for each child's birthday, all made out to my wife.

We then deposit the checks into our checking account and transfer the same amount from the checking account into each ESA.

Whose income matters in this situation for purposes of the Coverdell ESA income limits? The grandparents', or mine and my wife's?

1 Answer 1

0

Whose income matters in this situation for purposes of the Coverdell ESA income limits? The grandparents', or mine and my wife's?

Either the parents or the grandparents can open the account. If the grandparents aren't in the correct income range, then the parents should open the account.

If the grandparents are in the correct income range, they can open the account and contribute the money directly.

The grandparents want the money placed in each child's Coverdell ESA, but they give the money by giving us checks for each child's birthday, all made out to my wife.

We then deposit the checks into our checking account and transfer the same amount from the checking account into each ESA.

The method that you describe would be seen as the funds coming for from the parents. If the grandparents want to make a contribution they should be able to make a contribution directly to the account.

Since the $2,000 annual limit is the maximum amount of money each child can receive in contributions each year from all sources, having a central account can help to avoid the over-contribution issue.

There are also 529 accounts that don't have income limits. Though both types of accounts have good points and bad points.

You must log in to answer this question.

Not the answer you're looking for? Browse other questions tagged .