No. Education IRA was renamed as Coverdell Educations Savings Account (CESA) in 2002. Both are the same with different names.
In a nutshell, CESA offers tax-free investment growth and tax-free withdrawals when the funds are spent on qualified education expenses. However, in addition to college expenses, certain K-12 purchases are also considered qualified when using a CESA. The money must be used or transferred to another beneficiary before the child turns 30.
Tax-free withdrawals are available on qualified education expenses. The qualifying education expenses have been expanded to include elementary and secondary education expenses at accredited institutions as well as internet access and computers. This means you can even invest to pay for your children to attend an Islamic school.
Most common education expenses may include the following, but please check the latest guidelines with your tax advisor:
Tuition fees, academic tutoring
Room and board
Commuting and education related travel
Student activity fees
Lab and other fees
Special equipment such as supplies, computer, printer etc.
Miscellaneous expenses such as internet
Special needs services in connection with enrollment or attendance at an eligible school.
There are federal tax and additional 10% penalties on non-qualifying expenses though.
Coverdell ESAs are only available to families below a specified income level. This may vary from year to year, please check with your tax advisor.
A CESA can be opened for anyone and funded up to the maximum yearly contribution allowed, currently maxed at up to $2,000 a year per child. Contributions are treated as completed gifts. Contributions must be made before the beneficiary reaches age 18. The funds must be used by age 30.
Yes. Contributions to a CESA can be made by parents as well as relatives and friends for the benefit of the child while offering full investment control to the parent or guardian. The total combined limit of investment however remains $2,000.
Yes. The funds can also be transferred from one child to another. This is especially useful in the event one of your children earns scholarships helping to decrease that child’s education expenses covered by CESA. The excess funds can then be used for another child in qualifying expenses.
Coverdell is available through halal investment vehicles and is fairly easy to set up. Iman Fund is a halal CESA investment option and we can help you set up a CESA for your child/ren. Call (877)-417-6161 to talk with a specialist.
Yes, it may. CESA investments are counted as a “parent asset” if the owner is a parent, so keep this in mind when applying for financial aid.
Section 529 plans are state sponsored and have no age or income restrictions. These plans are also open to non-residents. Like Coverdell, they also offer tax-free growth on investment and tax free withdrawals for qualifying education expenses. If used on non-qualifying purchases, there will be federal tax penalty of 10%. Halal options are not available in the section 529 plans.
There may be other distinguishing benefits and/or restrictions. Please check with your tax and investment advisors to see what may be right for you.
The Fund invests in foreign securities, which involve greater volatility and political, economic, and currency risks and differences in accounting methods. It is possible that the Islamic Shari’ah restrictions placed on investments and reflected in the main investment strategies may result in the Fund not performing as well as mutual funds not subject to such restrictions.
Past performance is not indicative of future results.
Diversification does not assure a profit or protect against a loss in a declining market.
The Fund is not available for sale to investors residing outside the United States.
The prospectus contains more complete information, including risks, fees, and expenses related to an ongoing investment in the Fund. You may also receive the prospectus or summary prospectus by calling (877) 417-6161. Please read the prospectus carefully before you invest or send money.
While the fund is no-load, management fees and other expenses still apply. Please refer to the prospectus for further details.
Allied Asset Advisors, LLC, an SEC registered investment advisor, is advisor to Iman Fund.
Iman Fund is distributed by Quasar Distributors, LLC.
The Iman FundAllied Asset Advisors, Inc.8925 S. Kostner AvenueHometown, IL 60456
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