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Meaning / Definition of

Disclosure

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A disclosure document explains how a financial product or offering works. It also details the terms to which you must agree in order to buy it or use it, and, in some cases, the risks you assume in making such a purchase.For example, publicly traded companies must provide all available information that might influence your decision to invest in the stocks or bonds they issue. mutual fund companies are required to disclose the risks and costs associated with buying shares in the fund. Government regulatory agencies, such as the securities and exchange commission (SEC), self-regulating organizations, state securities regulators, and NASD require such disclosures.Similarly, federal and local governments require lenders to explain the costs of credit, and banks to explain the costs of opening and maintaining an account.Despite the consumer benefits, disclosure information isn't always easily accessible. It may be expressed in confusing language, printed in tiny type, or so extensive that consumers choose to ignore it.

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Definition / Meaning of

Education Savings Account (ESA)

Categories: Finance,

You can put up to $2,000 a year into a coverdell education savings account (ESA) that you establish in the name of a minor child. The assets in the account can be invested any way you choose.There is no limit on the number of accounts you can set up for different beneficiaries, but no more than a total of $2,000 can be contributed in a single beneficiary's name in any one year. If you choose, you may switch the beneficiary of an ESA to another member of the same extended family.Your contribution is not tax deductible. But any earnings that accumulate in the account can be withdrawn tax free if they're used to pay qualified educational expenses for the beneficiary until he or she reaches age 30. The costs can be incurred at any level, from elementary school through a graduate degree, or at a qualified post-secondary technical or vocational school. There are no restrictions on using ESA money in the same year the student uses other tax-free savings, or the student, parent, or guardian uses tax credits for educational expenses. But you can't take a credit for expenses you covered with tax-free withdrawals.To qualify to make a full $2,000 contribution to an ESA, your modified adjusted gross income (MAGI) must be $95,000 or less, and your right to make any contribution at all is phased out if your MAGI is $110,000 if you're a single taxpayer. The comparable range if you're married and file a joint return is $190,000, phased out at $220,000.

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