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ESA Withdrawal Guidelines

About to Turn 30? Review These ESA Withdrawal Guidelines

SFPCU members who are getting ready for their 30th birthday may also want to be prepared to make a decision about the funds in their Coverdell Education Savings Accounts (ESAs).

When you were younger, your family may have created an ESA to help build a savings cushion for your education. Withdrawals from these accounts are tax and penalty-free as long as they're used for specific expenses related to elementary, secondary, or post-secondary school. If your parents made contributions to an ESA in your name, and there are still assets in the account by the time you turn 30, that money has to be distributed back to the individual responsible for the account. Depending on the information provided at the time the account was created, the responsible individual could be either you or the family member who originally set up your ESA--and you'll have to take action if you have a preference about what happens with the money in the account.

What to do with your ESA

If you're about to turn 30 and you received an ESA notification in the mail from SFPCU partner Ascensus, here are your options:

  • You can withdraw all of the assets and close the ESA. In order to do this, you must fill out the Coverdell ESA Withdrawal Instruction form (it should be included with the notice you get in the mail) and make sure we receive it no later than 30 days after your 30th birthday. It's important to note that you will be taxed on the funds you withdraw.
  • Roll the balance over to a qualifying family member under age 30. Contact the appropriate financial institution to move the funds to a younger family member's ESA.

If your 30th birthday has passed and the ESA funds haven't been rolled over to someone else, the individual responsible for the ESA will receive the disbursement as a check from SFPCU.

You might qualify as a special needs beneficiary, which could extend the amount of time you have to withdraw the assets from your ESA. If you feel that you qualify, be sure to consult a tax advisor for more information on your status and necessary actions. Once you've confirmed your status, be sure to notify SFPCU immediately.

If you have any questions about your Coverdell Education Savings Account, please contact us at 800.222.1391 and we'll be happy to help.