You are not required to distribute it all at once. You can and that does boost the tax bracket. You could do a small distribution each year and/ or leave some in case she changes her mind later about graduate school.
Your Coverdell contributions over the years to save up are the cost basis. So, if you put in $50k and are taking out $80k, only earnings of $30k is taxable. It should show on the 1099-Q the basis and earnings.
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