Coverdell education savings account
This tax-deferred savings plan used to be known as an education IRA. But it was revamped in 2002 and named in honor of the late U.S. Sen. Paul Coverdell of Georgia, who championed the changes.
Up to $2,000 can be contributed annually to Coverdell accounts. Anyone who meets the plan's earnings limits can put money into the account, which is held in the name of and benefit for a child's education. The contributions aren't deductible by the donors, but the earnings grow tax-free and, when certain requirements are met, withdrawals from the account also aren't taxed.
In addition to paying for some college expenses, Coverdell funds also can be used for certain pre-college expenses, including books, tutoring and computers for public, private or parochial elementary and secondary schools.
You can open as many Coverdell accounts as you wish for a child, but no more than $2,000 per year can be contributed for the student, regardless of how many accounts he or she has. Contributions also aren't allowed once the youngster turns 18, unless the beneficiary is a special needs child.