coverdell or 529 plan

What are the differences between the federal Coverdell College Savings plan and the state-administered 529 plans? Which is a better vehicle to save for college?

Both the 529 state plans and the Coverdell Educational Savings Accounts (CESA) are excellent vehicles for college saving. The 529 plans are more generous in their contribution limits ($100,000-$350,000) than the CESA plans ($2000 per year). Contributions are not federally tax deductible, but your contribution to Missouri's 529 plan may be state tax deductible. Please see your tax advisor for complete tax deductibility rules.

Withdrawals from either 529 plans or CESA plans are tax free as long as the funds are used for college purposes. CESA withdrawals may be made for K-12 expenses as well.

Please discuss your college savings plan with your financial advisor for investmement and to determine which plan may be best for you. You may be able to use both!

Coverdell Education Savings Accounts provisions are set to expire on December 31, 2010. If you have one of these accounts please see your advisor as to what your options are with these accounts and other college savings plans.