My sons (ages 25 and 27) are college graduates and do not plan to pursue graduate degrees.
I currently have:
- A Maryland 529 plan for each son with approximately $10,000 per account
- A Coverdell ESA for each son, established by my mother, with approximately $20,000 per account at Putnam
All of these accounts are more than 15 years old. My mother recently passed away.
The Putnam advisor has recommended converting the Coverdells to 529 plans but indicated that the original account age would not carry over. My long-term goal is to preserve the tax advantages and ultimately convert eligible funds to each son’s Roth IRA. I would also prefer to move the assets out of Putnam so my sons can manage them independently.
I plan to convert $7,500 to each of my sons’ Roth IRAs for the 2026 tax year.
My questions are:
- Is there any way to preserve the tax benefits and account aging of the Coverdell ESAs when converting them to 529 plans for purposes of future Roth IRA rollovers?
- Can the Coverdells be rolled directly into the existing Maryland 529 plans, or must they first be converted to Putnam 529 plans and then transferred?
- From a tax and planning standpoint, what would you recommend doing with the Coverdells to best preserve their value and flexibility?