Articles of interest

Formerly called education IRAs, education savings plans now allow one to save $2,000 per child, per year.

Not everyone can contribute to education savings plans. The threshold income limit for a full contribution is adjusted gross income for a married couple of $190,000 and for a single person $95,000. Partial contributions can be made between $190,000 and $200,000 for joint AGI and between $95,000 and $110,000 for single AGI.

Money contributed to an education savings plan can be used for any education expenses, from elementary to post-secondary education.

Money contributed to an education savings plan is not tax deductible; however investments in the plan grow tax free.

Money withdrawn from an education savings plan and used for qualified education expenses is federally tax free and tax free in most states, as well.

Money withdrawn from an education savings plan that is not used for education expenses is subject to a 10% penalty, plus ordinary income taxes at the parent's rate.

In addition, money must be withdrawn from education savings plans by age 30.

From a financial aid perspective, assets in an education savings plan are considered assets of the child, and so the entire amount will be expected to be used for education expenses just like is now the case with UGMA accounts.