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Rules for contributions to a Coverdell education savings account.
You can make just about any kind of investment in a Coverdell account. That's one of the great advantages of a Coverdell account over a 529 account. You have your choice of just about any mutual fund, or you can invest in individual stocks and bonds if you prefer. You can change investments as often as you like, and move the entire account to a different provider.
Use this freedom wisely. Avoid overly risky investments that can wipe out your child's college savings, and avoid incurring excessive costs from frequent trading or from mutual funds that incur high expenses. If you lack experience in making these choices, seek help from a qualified (and unbiased) financial advisor.
While you have a great deal of freedom concerning investments for Coverdell accounts, there are some things you are not allowed to do:
A Coverdell account has to be established with a financial institution such as a bank, mutual fund company or stockbroker. That means you may have difficulty finding a provider that will accept the account if you want to do something exotic, like investing in a partnership. That's probably just as well, because unconventional investments generally aren't suitable for Coverdell accounts even if they're permitted.
The person who sets up the Coverdell account controls how the funds are initially invested. From that point forward, the responsible individual controls the investments. (This can be the same person if a parent sets up the account and names himself or herself as the responsible individual.) You can change the investments as often as you like provided that you don't do more than one rollover per year.
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