Coverdell ESAs combine the following features:
I. Contribution is allowed up to $2,000 per year
II. Investments are tax-deferred, but withdrawals are taxable
III. They adversely affect financial aid application
IV. Contributions are controlled by parents
The correct answer is:

Question

Coverdell ESAs combine the following features: 
I. Contribution is allowed up to $2,000 per year
II. Investments are tax-deferred, but withdrawals are taxable
III. They adversely affect financial aid application
IV. Contributions are controlled by parents
The correct answer is:

Quizplus · Accepted Answer

I, III, and IV are correct. Contributions to a Coverdell ESA are limited to $2,000 per year, they can impact financial aid eligibility, and contributions are indeed controlled by the parents or other designated contributors. However, the investments grow tax-deferred, and withdrawals for qualified education expenses are tax-free, not taxable, making statement II incorrect.

Coverdell ESAs Combine the Following Features