Save time with our cheat sheets, fact sheets, checklists & books!

February 16, 2009

Qualified distribution- Education Savings Account (ESA )

Print

Definition

A distribution from an education savings account (ESA) that is used to pay for qualified education expenses at an eligible education institution. Generally, qualified education expenses are those required for the enrollment or attendance of the designated beneficiary at an eligible educational institution. For purposes of Coverdell ESAs, the expenses can be either qualified higher education expenses or qualified elementary and secondary education expenses.

The designated beneficiary is the child for whom the ESA is established.

Referring Cite

IRC §530, IRS Publication 970

Additional Helpful Information

Assets in an ESA must be fully distributed within 30 days after the designated beneficiary reaches age30. The assets can be rolled over or transferred to an eligible family member who is under age 30.

The age 30 rule does not apply to ‘special needs’ beneficiaries.

For nonqualified distributions, the earnings are subject to taxes and the 10% early distribution penalty.

Related Articles Tutorial or Other Content

More

Keep Learning

Applicable RMD Age

Applicable RMD Age The first year for which an IRA owner or plan participant must begin to take RMDs from their tax-deferred retirement account. RMDs

SIMPLE 401(k) Plan

Definition A SIMPLE 401(k) plan is a 401(k) plan established by a small business for it’s employees. Earnings accrue on a tax-deferred basis and distributions

Required Minimum Distribution (RMD)

Definition The minimum amount that must be withdrawn from retirement accounts, including qualified plans, 403(b) accounts, 457(b) accounts or IRAs, each year.  For retirement account

Required beginning date (RBD)

Definition The date by which a retirement account owner must begin distributing required minimum distribution (RMD) amounts from a Traditional,  SEP or SIMPLE IRA, a

Be among the first to know when

IRA Rules
Change