November 26, 2004 08:24 AM
The School-Savings Plan With a 'Huh?' Name
Excerpt: The lack of buzz is partly because the Coverdells, which are offered by mutual-fund companies and other financial institutions, have an identity problem. The moniker given to these accounts in 2001 in tribute to the late Sen. Paul Coverdell, a longtime supporter, isn't a household name. Indeed, many people are more familiar with these accounts as the vehicles that used to be called Education IRAs.
There has been a lot of talk about "529" college-savings plans in recent months, including criticism that some of these popular state-sponsored plans charge excessive fees.
But there has been far less attention paid to Coverdell Education Savings Accounts, another tax-favored vehicle that can be useful as an adjunct or alternative to a 529.
The lack of buzz is partly because the Coverdells, which are offered by mutual-fund companies and other financial institutions, have an identity problem. The moniker given to these accounts in 2001 in tribute to the late Sen. Paul Coverdell, a longtime supporter, isn't a household name. Indeed, many people are more familiar with these accounts as the vehicles that used to be called Education IRAs (echoing the description "the artist formerly known as Prince" for the musician who changed his name to a symbol.)
Like 529s, Coverdell accounts offer tax-deferred growth and the ability to pull money out without tax as long as it is used for qualified educational expenses. But investors generally aren't clamoring for Coverdells. "We don't get e-mails for it, we don't get phone calls for it, I'm not sure anyone has ever asked for it," says Jim Atkinson, chief executive of fund manager Guinness Atkinson Asset Management LLC.
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