Potential Advantages:
The primary advantage of a Coverdell ESA is that it allows for tax-deferred growth of its assets, as well as tax-free distributions for qualified educational expenses.Coverdell ESA’s also allow for tax-free distributions to help pay for elementary, middle, and high school educational costs. This is not allowed in Section 529 plans.
Potential Disadvantages:
The biggest disadvantage for parents and donors is the rule requiring you to either distribute the Coverdell ESA at age 30 or roll it over to another child. Thus, if there is still money in the account and the children either decide against going to college or do not need all the money, a parent may eventually have to hand it over to them.
