The Coverdell Education Savings Account allows deposits of up to $2,000 per child per year through payroll deduction or direct deposit. Distributions for qualified education expenses are tax and penalty free however, distributions due to the beneficiary’s death, disability or receipt of a scholarship are subject to tax on the earnings (but no penalty). If the amount is withdrawn for any other reason then it is also subject to tax and an IRS 10 percent penalty will be charged. In case the child is unwilling to pursue further studies then the amount can be rolled over to another member of the same family.