Give the Gift of Education with a Coverdell Education Savings Account
Prepare for the Future with a Coverdell ESA
The Coverdell Education Savings Account (ESA) is a trust or custodial account that offers you a tax-advantaged method to save up to $2,000 per year for your child's education — both elementary/secondary education (kindergarten through grade 12) and post-secondary education (college, graduate school, vocational school, etc.). You can establish a Coverdell Education Savings Account through State Farm® for the benefit of any child under age 18.
Open an Account
Ages and Accounts
You can contribute to a Coverdell Education Savings Account anytime after the birth of a child and up to the child's 18th birthday. Contributions will not be accepted after that time, unless the child is a special needs beneficiary (as defined by Treasury Department regulations).
There is no limit to the number of Coverdell Education Savings Accounts that can be established designating a particular child as beneficiary; however, the total aggregate contributions to all accounts on behalf of a beneficiary in any year cannot exceed $2,000.1
You may contribute up to $2,000 annually to a child's Coverdell Education Savings Account if your modified adjusted gross income (see table below) is less than $95,000 as a single tax filer (or married filing separate) or $190,000 as a married couple filing jointly in the tax year in which you contribute. The $2,000 maximum contribution limit is gradually reduced if your modified adjusted gross income exceeds these limits.
Anyone (including the child for whose benefit the account is established) may contribute to a child's Coverdell ESA, as long as his or her income falls within the income guidelines and the total of all contributions for one beneficiary does not exceed the $2,000 limit.
$2,000 per child (designated beneficiary of the account), regardless of the number of accounts designating a particular child as beneficiary.
Aggregate contributions for the benefit of a particular child in excess of $2,000 for a taxable year are treated as excess contributions. If the excess contributions (and the earnings attributable to them) are not withdrawn from the child's account(s) before June 1 of the following tax year, the excess contributions are subject to a 6% excise tax (reported on the beneficiary's tax return) for each year the excess amount remains in the account.
Contributions may be made to both a Coverdell Education Savings Account and a qualified tuition program on behalf of the same designated beneficiary for the same taxable year.
You can make annual contributions to a Coverdell Education Savings Account from January 1st through the tax-filing deadline (excluding extensions) for the year, generally April 15.
The annual amount you can contribute to a Coverdell Education Savings Account is dependent on your modified adjusted gross income as determined on your federal income tax return. The following table should help you determine whether or not you are eligible to contribute:
|For Tax Year 2012 & 2013||
|Your Tax Filing Status||Full Contribution||Partial Contribution||Not Eligible|
|Single/Head of Household*||Up to $95,000||$95,000 - $110,000||Above $110,000|
|Married Filing Jointly||Up to $190,000||$190,000 - $220,000||Above $220,000|
Contributions to a Coverdell Education Savings Account are not deductible, but amounts deposited in the account grow tax free until distributed.
All earnings in the account accumulate on a tax-deferred basis and can be withdrawn from the account tax-free if used to pay for qualified education expenses, such as tuition and fees, required books, supplies and equipment, and qualified expenses for room and board.
The Hope and lifetime learning credits can be claimed in the same year the beneficiary takes a tax-free distribution from a Coverdell Education Savings Account, as long as the same expenses are not used for both benefits.1
To avoid taxes and penalties on earnings, distributions must not exceed the amount of qualified education expenses for the year in which they are taken.
Qualified education expenses include (1) qualified elementary and secondary education expenses and (2) qualified higher education expenses. Qualified education expenses also include any contribution to a qualified tuition program on behalf of the designated beneficiary.
Qualified elementary and secondary education expenses include expenses for:
Tuition, fees, academic tutoring, special needs services in the case of a special needs beneficiary, books, supplies, and other equipment incurred in connection with the enrollment or attendance of the designated beneficiary as an elementary or secondary school student at a public, private, or religious school. (School means any school that provides elementary or secondary education [kindergarten through grade 12] as determined under state law.)
Room and board, uniforms, transportation, and supplementary items and services (including extended-day programs) that are required or provided by a public, private, or religious school in connection with enrollment or attendance.
Expenses for the purchase of any computer technology or equipment, or to pay for Internet access and related services, are considered qualified education expenses if such technology, equipment, or services are to be used by the beneficiary and the beneficiary's family during any of the years the beneficiary is in school (not including expenses for computer software designed for sports, games, or hobbies unless the software is predominantly educational in nature).
Tuition, fees, special needs services in the case of a special needs beneficiary, books, supplies, and equipment required for the enrollment or attendance of the designated beneficiary at an eligible educational institution.
The cost of room and board is a qualified education expense if the designated beneficiary is at least a half-time student* at an eligible educational institution. The expense for room and board is generally limited to:
- The school's posted room and board charge for students living on campus, or
- $2,500 each year for students living off campus and not at home.
* A half-time student is enrolled "at least half-time" if he or she is enrolled for at least half the full-time academic work load for the course of study the student is pursuing as determined under the standards of the school where the student is enrolled.
An eligible educational institution is any college, university, vocational school, or other postsecondary educational institution eligible to participate in the student aid programs administered by the Department of Education. This category includes virtually all accredited public, nonprofit, and proprietary postsecondary institutions. (These same eligibility requirements for institutions apply for the Hope Scholarship Credit, the Lifetime Learning Credit, and early withdrawals from IRAs for qualified higher education expenses.) The educational institution should be able to tell you if it is an eligible educational institution.
If funds remain in the account after the beneficiary completes his/her post-secondary education or reaches the age of 30,* there are two available options to distribute the funds:
The amount remaining in the account may be withdrawn for the designated beneficiary. The funds will be subject to both income tax and a 10% withdrawal penalty tax on the portion of the withdrawal that represents earnings.
The designated beneficiary may roll over the full balance to a different Coverdell Education Savings Account for another family member, thus avoiding the taxes and penalty described above.
* If there is a balance in the Coverdell Education Savings Account when the beneficiary reaches age 30, it must generally be distributed within 30 days.1
Find an Agent
Investing involves risk, including potential for loss.
Mutual Funds Disclosure
Before investing, consider the funds' investment objectives, risks, charges and expenses. Contact State Farm VP Management Corp (800-447-4930) for a prospectus or summary prospectus containing this and other information. Read it carefully.
Automatic investment plans do not assure a profit or protect against loss.
Neither State Farm nor its agents provide investment, tax, or legal advice.
It is not possible to invest directly in an index.
State Farm VP Management Corp. is a separate entity from those State Farm entities which provide banking and insurance products.
As of June 2, 2010, additional fees may apply to certain accounts with balances less than $5000.
Each State Farm LifePath Fund invests all of its assets in a corresponding LifePath Master Portfolio under a master/feeder structure. BlackRock Fund Advisors ("BFA") is the investment advisor to the LifePath Master Portfolio. State Farm Investment Management Corp. (SFIMC) is the investment advisor to the State Farm LifePath Funds. State Farm VP Management Corp. (SFVPMC) is the distributor of the State Farm LifePath Funds. Neither SFIMC nor SFVPMC are affiliated with BFA or its affiliates.
BlackRock Investors Services (BIS) provides marketing support to the LifePath Master Portfolios. BFA and BIS are wholly owned subsidiaries of BlackRock Institutional Trust Company, N.A. ("BTC"). Neither BTC nor its affiliates are affiliated with SFIMC or SFVPMC. BTC is located at 400 Howard Street, San Francisco, CA 94105.
BlackRock Fund Advisors ("BFA") is the investment sub-advisor to the S&P® 500 Index Fund.
Ascensus provides recordkeeping and administrative services for retail 401(k) retirement plans offered by State Farm Investment Management Corp.
Net Asset Value (NAV) is calculated by adding all of the assets of a Fund, subtracting the Fund's liabilities, then dividing by the number of outstanding shares.
The Russell 2000® Index tracks the common stock performance of the 2,000 smallest U.S. companies in the Russell 3000 Index.
The Russell 2500 Index measures the performance of the 2,500 smallest securities in the Russell 3000 Index.
The Russell 1000 Index is a market-capitalization weighted index that tracks the largest 1,000 companies in the Russell 3000 Index.
The Russell Midcap Index measures the performance of the mid-cap segment of the U.S. equity market and is a subset of the Russell 1000 Index.
The Dow Jones Industrial Average is an unmanaged average of 30 actively traded stocks.
The NASDAQ Composite is an unmanaged market capitalization weighted index that is designed to represent the performance of the National Market System.
The S&P 500® Index tracks the common stock performance of 500 large U.S. companies.
The Barclays 1-5 Year U.S. Treasury Index measures the performance of short-term U.S. Treasury Securities maturing within one to five years.
The Barclays U.S. Aggregate Bond Index represents debt securities in the U.S. investment grade fixed rate taxable bond market.
The Barclays Municipal Bond Index is an unmanaged index representative of the tax-exempt bond market.
The Barclays High-Yield Bond Index covers the U.S. dollar-denominated, non-investment grade, fixed-rate, taxable corporate bond market.
The Barclays U.S. TIPS Index is an unmanaged index composed of inflation protected securities issued by the U.S. Treasury.
The Citigroup 3-Month Treasury Bill Index is an unmanaged index of three-month Treasury bills.
The FTSE EPRA/NAREIT Developed Real Estate ex-U.S. Index is designed to measure the stock performance of companies engaged in specific real estate activities of the real estate markets outside of the United States.
The FTSE EPRA/NAREIT Developed Real Estate Index is designed to measure the stock performance of companies engaged in specific real estate activities of the North American, European, and Asian real estate markets.
The Morgan Stanley Capital International Europe, Australasia and Far East Free (EAFE® Free) Index currently measures the performance of stock markets of Europe, Australia, New Zealand, and the Far East.
The MSCI All Country World Index (ACWI) is a free float-adjusted market capitalization weighted index that is designed to measure the equity market performance of developed and emerging markets.
The MSCI All Country World Index (ex-U.S.) (MSCI ACWI ex-U.S. Index) is a free float-adjusted market capitalization index that is designed to measure equity market performance in global developed and emerging markets, excluding the United States.
The MSCI Emerging Markets Index is a float-adjusted market capitalization index designed to measure equity market performance in global emerging markets.
The Credit Suisse High Yield Index is designed to mirror the investible universe of the U.S. dollar-denominated high yield debt market.
The New York Stock Exchange is considered the largest equities-based exchange in the world based on total market capitalization of its listed securities.
The Nikkei 225 Index is a price-weighted index comprised of Japan's top 225 blue–chip companies on the Tokyo Stock Exchange.
The Blended Benchmark for the Equity and Bond Fund is a combination of 60% of the S&P 500 Index and 40% of the Barclays U.S. Aggregate Bond Index, rebalanced monthly.
The Blended Benchmark for the LifePath Funds is a combination of the holdings in the Barclays U.S. Aggregate Bond Index, Russell 1000 Index, Russell 2000 Index, MSCI ACWI ex-U.S. IMI Index, Dow Jones-UBS Commodity Index, FTSE EPRA/NAREIT Developed Real Estate Index and Barclays U.S. TIPS Index. The weightings of the indices are adjusted quarterly to reflect the funds' changing asset allocations over time.
iShares, LifePath and LifePath followed by 2020, 2030, 2040 and 2050 are all registered trademarks of BlackRock Institutional Trust Company, N.A.
"S&P 500®" is a trademark of The McGraw-Hill Companies, Inc. and has been licensed for use by the State Farm Mutual Fund Trust. The State Farm S&P 500 Index Fund (the "Fund") is not sponsored, endorsed, sold or promoted by Standard & Poor's, and Standard & Poor's makes no representation regarding the advisability of investing in the Fund.
Russell Investment Group ("Russell") is the source and owner of the trademarks, service marks and copyrights related to the Russell 2000® Index. Russell® is a trademark of Russell. The State Farm Small Cap Index Fund (the "Fund") is not sponsored, endorsed, sold or promoted by, nor in any way affiliated with Russell. Russell is not responsible for and has not reviewed the Fund nor any associated literature or publications and Russell makes no representation or warranty, express or implied, as to their accuracy, or completeness, or otherwise.
The EAFE® Free Index is a trademark, service mark and the exclusive property of Morgan Stanley Capital International, Inc. ("MSCI") and its affiliates and has been licensed for use by the State Farm Mutual Fund Trust (the "Trust"). The State Farm International Index Fund (the "Fund"), based on the EAFE® Free Index, has not been passed on by MSCI as to its legality or suitability, and is not issued, sponsored, endorsed, sold or promoted by MSCI. MSCI makes no warranties and bears no liability with respect to the Fund. MSCI has no responsibility for and does not participate in the management of the Fund assets or sale of the Fund shares. The Trust's Statement of Additional Information contains a more detailed description of the limited relationship MSCI has with the Trust and the Fund.
Each of the investment products and services referred to on the State Farm Mutual Funds web site is intended to be made available to customers or prospective customers residing in the United States. The customer's U.S. permanent residence address must be a street address. This web site shall not be considered a solicitation or offering for any investment product or service to any person in any jurisdiction where such solicitation or offer would be unlawful.
Business Continuity Plan
State Farm VP Management Corp. has developed a Business Continuity Plan on how we will respond to events that significantly disrupt our business. Since the timing and impact of disasters and disruptions is unpredictable, we will have to be flexible in responding to actual events as they occur. With that in mind, download this information on our business continuity plan [PDF-27.5KB].
800-447-4930 Mutual Funds
888-702-2307 Variable Products
Not FDIC Insured
- No Bank Guarantee
- May Lose Value