A CESA is a Trust or Custodial Account created for the purpose of paying for qualified educational expenses and requires a designated beneficiary. When the account is established the beneficiary must be under age 18 or a special needs beneficiary.
Who can contribute:
Any individual (including the beneficiary) who's Modified Adjusted Gross Income (MAGI) is less than $110,000 or 200,000 if filing jointly.
How much can be contributed:
Total contributions for the beneficiary cannot be more than $2,000 in any year.
Why should I open a CESA for my son/daughter/grandchild:
Earnings on the account grow tax free until distributed and funds may be used by the beneficiary for qualified educational expenses including post secondary school or an eligible elementary or secondary school.
For more information and tax benefits of the CESA reference IRS Publication 970.
For the most up-to-date IRA rules and regulations, visit www.irs.gov