The Plan has always offered a high contribution ceiling and low eligibility requirements. The new tax law says: “Earnings and withdrawals are tax free as long as the money is used to pay qualified, higher education expenses.”You can also roll over your account once a year if you are not happy with your investments.

Beginning in 2002,you can raise your annual contribution from $500 to $2,000 for an Education Savings Account (ESA),and your earnings and withdrawals are tax free.The funds can be used for private elementary and secondary education,as well as college education. (The new tax changes also allow you to make contributions to both a Coverdell Plan and an ESA in the same year).

Custodial accounts, such as UGMA or UTMA, have no eligibility requirements, no contribution limits, and the money saved is not limited to college expenses. he tax benefits are not as strong compared with the Coverdell or 529 plans; however, custodial accounts are very appealing. Many people like the fact that they are able to maintain control of their investment decisions and the money distribution.There ’s no penalty or restriction on money that is left in the account as long as it is used for the child ’s benefit.