The benefits of the Coverdell education savings account (ESA) were made permanent with the American Taxpayer Relief Act of 2012 (ATRA). Although it was around long before that since 1998--when it was called the Education IRA--the ESA has long been overshadowed by the 529 plan.
Offering investment flexibility that is superior to the 529 plan, potentially lower costs, and tax-free treatment not just for college expenses but for a wide range of elementary and secondary school costs (K-12) as well, the ESA is a worthy competitor for your education-savings dollars.
Actually, the ESA has offered these benefits since the 2001 EGTRRA tax law. (Prior to 2002, the Education IRA was truly an atrocious vehicle, so much so that we at Savingforcollege.com labeled it the 'Excedrin IRA.') But over the years we remained reluctant to recommend it, knowing that its improved features were slated to expire at the end of 2012.
If ATRA had not come along to save the ESA, we would be looking at a $500 annual per-child contribution cap beginning in 2013; K-12 expenses would no longer be qualified; and ESA distributions for college would lose tax-free status for any family claiming the Hope/American Opportunity credit or Lifetime Learning credit.