Education and Health Savings Plans

The maximum annual contribution to a Coverdell Education Savings Account is: a. $2,000 b. $2,500 c. $3,000 d. $4,000

a. $2,000.

High earning individuals can make contributions to: I. UGMA accounts II. Roth IRAs III. UTMA accounts IV. Coverdell ESAs a. I and III b. I and IV c. II and III d. II and IV

a. I and III.

Many years ago, a customer opened a Coverdell ESA for his son, who is now age 16, and a savings account for his daughter, who is now age 18. The 18-year old daughter is entering college and does not have enough money in the savings account to pay for tuition. To pay the tuition bills, the customer: a. can change the beneficiary on the Coverdell ESA from the son to the daughter b. can use the funds from the Coverdell ESA with the written approval of the son c. can use funds from the Coverdell ESA with the written approval of the IRS d. cannot use the funds in the Coverdell ESA

a. can change the beneficiary on the Coverdell ESA from the son to the daughter.

A distribution from a Section 529 Plan would be taxable if the beneficiary: a. does not go to college b. gets a full scholarship c. goes on disability d. goes to vocational school

a. does not go to college.

A woman in the highest tax bracket has $105,000 to invest for her teenage child's college education. She wants to make sure that, if he doesn't attend college, that he will not have access to these funds. She should be advised to make the investment in a: a. coverdell ESA b. 529 plan c. UTMA account d. Growth mutual fund

b. 529 plan.

A customer that earns $300,000 per year wishes to set aside funds for his 12 year old daughter's future college expenses. Which statements are TRUE? I. the customer can open a UTMA account for the daughter to deposit the funds II. the customer cannot open a UTMA account for the daughter to deposit the funds III. the customer can open a Coverdell ESA account for the daughter to deposit the funds IV. the customer cannot open a Coverdell ESA account for the daughter to deposit the funds a. I and III b. I and IV c. II and III d. II and IV

b. I and IV.

Which statements are TRUE about coverdell education savings accounts? I. contributions can continue until the beneficiary reaches age 18 II. contributions can continue until the beneficiary reaches age 30 III. distributions to the beneficiary must be completed upon reaching age 18 IV. distributions to the beneficiary must be completed upon reaching age 30 a. I and III b. I and IV c. II and III d. II and IV

b. I and IV.

When comparing section 529 plans to coverdell education savings accounts, which statement is FALSE? a. the account may be opened by any adult b. annual contributions are limited to $2,000 per beneficiary c. earnings build in the account tax deferred d. distributions to pay for higher educations expenses are not taxable

b. annual contributions are limited to $2,000 per beneficiary.

An uncle opens a Coverdell ESA for his niece and makes deposits over a number of years. When she enters college, the niece withdraws $10,000 from her Coverdell ESA to pay for expenses. The student only uses $9,000 of the funds. The remaining $1,000: a. must be redeposited to the account b. is taxable at ordinary income tax rates to the niece c. is taxable at ordinary income tax rates to the uncle d. is not taxable and can be used by the niece for any purpose

b. is taxable at ordinary income tax rates to the niece.

A 529 plan is set up for a child in State A. The child attends a college in State B. Which statement is TRUE? a. the funds in the 529 plan are not portable and can't be used to pay for college in state B b. the funds in the 529 plan are portable and can be used to pay for college in state B c. the funds must be transferred into a 529 plan in state B if they are going to be used to pay for college in state B d. the child must renounce his or her residency in state A and become a resident in state B in order to use the funds in the 529 plan for college in state B

b. the funds in the 529 plan are portable and can be used to pay for college in state B.

Which statements are TRUE when comparing UTMA Custodian Accounts to Coverdell Education Savings Accounts? I. contributions to UTMA accounts are limited to $2,000 annually II. contributions to coverdell education savings accounts are limited to $2,000 annually III. earnings in UTMA accounts are subject to federal income tax IV. earnings in coverdell education savings accounts are subject to federal income tax a. I and III b. I and IV c. II and III d. II and IV

c. II and III.

Section 529 plans are established by: a. the IRS b. the SEC c. the State d. FINRA

c. the State.

All of the following statements are true about Health Savings Accounts EXCEPT: a. HSAs are only appropriate for those individuals covered by high-deductible health insurance plans b. HSAs can be set up to include dependents of the covered individual c. HSA contributions are tax deductible d. HSA contributions are subject to phase-out when an individual's income exceeds $250,000

d. HSA contributions are subject to phase-out when an individual's income exceeds $250,000.

Which statements are TRUE about coverdell education savings accounts? I. contributions are tax deductible II. contributions are not tax deductible III. distributions are taxable IV. distributions are not taxable a. I and III b. I and IV c. II and III d. II and IV

d. II and IV.

ABLE account distributions are tax-free when used to pay for qualifying: a. lower education expenses b. higher education expenses c. medical expenses d. disability expenses

d. disability expenses.