Military survivor benefits may be contributed to Coverdell ESA
President George Bush yesterday signed into law the Heroes Earnings Assistance and Relief Tax Act (HEART), also known as the Military Tax Relief Act. One the Act's provisions permits families of soldiers killed in the line of duty to contribute 100 percent of survivor benefits to a Coverdell education savings account within one year of receiving the benefits or, for deaths from injuries occuring between October 7, 2001 and June 16, 2008, within one year from June 16, 2008. The contribution constitutes a "rollover" and consists entirely of basis, not earnings.
Alternatively, the family may roll over benefits to a Roth IRA or split the rollovers between a Roth IRA and a Coverdell ESA.