RETIREMENT PLANS: EDUCATION + HEALTH

LGIPs marketed by broker-dealers are investment vehicles offered to: A. the general public B. wealthy accredited investors C. major institutional investors D. local governmental entities in that state

D. local governmental entities in that state

UGMA/UTMA Custodian Account

-Any amount can be donated into the account -no tax deduction for the donation -Earnings are taxable each year -Distributions are not taxed - "after-tax" dollars -beneficiary cannot be changed to another minor

Coverdell Education Savings Account (ESA)

-maximum of $2,000 per child -used to pay for qualifying educational expenses (elementary school, middle school, and high school in addition to the cost of higher education) -No tax deduction -Earnings build tax-deferred -no tax on distributions if funds are used to pay for qualified education expenses -contribution until age 18 -distributions age 30 -NOT available to high-earning individuals -individuals = $110,000 -couples = $220,000

Section 529 Plans

-state-sponsored savings plans -pay for a beneficiary's qualified higher education expenses (college and higher) -up to $10,000 per year to be withdrawn to pay for education below the college level -not deductible at the federal level. -most states income tax -max $15,000 - $75,000 can be donated as a 1-time gift and not be subject to gift tax

Health Savings Accounts (HSAs)

-tax advantaged medical savings account -owned by the individual -established by corporate employers as part of their health insurance plans -only plans that have a high deductible -$3,500 = single individual -$7,000 = family -grows tax-deferred -withdrawals are tax-free

A customer that earns $50,000 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

A. I and III

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

The beneficiary of a Section 529 account may: I. Be the beneficiary of a Custodian account under UGMA as well II. not be the beneficiary of a Custodian account under UGMA as well III. be the beneficiary of a Coverdell Education Savings Account as well IV. not be the beneficiary of a Coverdell Education Savings Account as well A. I and III B. I and IV C. II and III D. II and IV

A. I and III

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

Section 529 plans are established by the: A. state B. donor C. recipient D custodian

A. state

ABLE Accounts

Achieving a Better Life Experience Act -each state set up a "municipal fund security" regulated by the MSRB -permits an account to be established to pay for the ongoing expenses of a disabled person -accumulated savings do not affect that person's eligibility for other Federal benefits - $15,000 per year

The maximum permitted annual contribution to a Coverdell Education Savings Account for a single beneficiary is: A. $2,000 in a single account B. $2,000 total in any number of accounts C. $4,000 in a single account D. $4,000 total in any number of accounts

B. $2,000 total in any number of accounts

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 education expenses are not taxable

B. Annual contributions are limited to $2,000 per beneficiary

Which statement is TRUE about the tax deductibility of 529 Plan contributions? A. Contributions are generally deductible at the federal level B. Contributions are generally deductible at the state level C. Contributions are generally deductible at the state level regardless of the state in which the plan was established D. Contributions are generally not deductible at either the federal or state level

B. Contributions are generally deductible at the state level

Which statements are TRUE about Coverdell Education Savings Accounts? A. Contributions can continue until the beneficiary reaches age 18; distributions to the beneficiary must be completed upon reaching age 18 B. Contributions can continue until the beneficiary reaches age 18; distributions to the beneficiary must be completed upon reaching age 30 C. Contributions can continue until the beneficiary reaches age 30; distributions to the beneficiary must be completed upon reaching age 18 D. Contributions can continue until the beneficiary reaches age 30; distributions to the beneficiary must be completed upon reaching age 30

B. Contributions can continue until the beneficiary reaches age 18; distributions to the beneficiary must be completed upon reaching age 30

Which statements are TRUE when comparing UTMA Custodian Accounts to Coverdell Education Savings Accounts? I. Earnings in UTMA accounts are subject to Federal income tax II. Earnings in UTMA accounts are not subject to Federal income tax III. Earnings in Coverdell Education Savings Accounts are subject to Federal Income tax IV. Earnings in Coverdell Education Savings Accounts are not subject to Federal Income tax A. I and III B. I and IV C. II and III D. II and IV

B. I and IV

Which statement is TRUE about changing the beneficiary on a Coverdell Education Savings Account? A. The beneficiary cannot be changed on a Coverdell ESA B. The beneficiary can be changed to any relative of the same or later generation C. The beneficiary can be changed to any relative D. The beneficiary can be changed to another individual attending school

B. The beneficiary can be changed to any relative of the same or later generation

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 of 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

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 grandmother wishes to make a gift into her grandson's 529 college savings plan. What is the maximum that can be contributed without incurring gift tax liability? A. 1 times the annual gift tax exclusion amount B. 2 times the annual gift tax exclusion amount C. 5 times the annual gift tax exclusion amount D. 10 times the annual gift tax exclusion amount

C. 5 times the annual gift tax exclusion amount

Which statement about 529 Plans is FALSE? A. Contribution limits are established by each state B. Distributions used to pay for qualified higher education expenses are not federally taxable C. Amounts contributed are generally deductible from federal income tax D. Earnings in the account grow tax deferred

C. Amounts contributed are generally deductible from federal income tax

LGIPs marketed by broker-dealers are: I. defined as a type of investment company II. Defined as a municipal fund security III. Regulated by the MSRB IV. Regulated by the SEC A. I and III B. I and IV C. II and III D. II and IV

C. II and III

Which of the following are characteristics of Coverdell ESAs? I. Can be transferred to any person at any time II. Transfer is limited to a family member under age 30 III. Tax free distributions are to be used only for educational purposes IV. Tax free distributions can be used for any purpose that benefits the student A. I and III B. I and IV C. II and III D. II and IV

C. II and III

Which statements are TRUE about HSAs? I. HSAs have the same contribution limits as IRAs II. HSAs have lower contribution limits than IRAs III. HSAs are funded with tax-deductible contributions IV. HSAs are funded with non tax-deductible contributions A. I and III B. I and IV C. II and III D. II and IV

C. II and III

High earning individuals are prohibited from making contributions to: I. Traditional IRAs II. Roth IRAs III. Coverdell ESAs A. I only B. I and II only C. II and III only D. I, II, III

C. II and III only

LGIPs offered by municipal broker-dealers are: A. investment vehicles available to the general public that permit tax-deferred saving for higher education B. investment vehicles available to the general public that permit tax-deferred saving for education below the college level C. investment vehicles available to local government entities that permit investment of excess funds D. investment vehicles available to local government entities that permit borrowing of funds as needed

C. investment vehicles available to local government entities that permit investment of excess funds

An individual who has completed college has been working for 9 years and is now 30 years old. He is thinking about returning to school in a few years to complete his masters degree and wants to set up a 529 Plan with himself as the beneficiary. Can he do this? A. No, because the donor and the beneficiary must be different persons in a 529 Plan B. No, because 529 Plans cannot be opened after age 30 C. No, because 529 Plans must have an independent trustee D. yes

D. yes

Distributions from a Coverdell Education Savings Account must cease when the beneficiary reaches the age of: A. 16 B. 18 C. 21 D. 30

D. 30

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

An ABLE account: I. must be established prior to the beneficiary reaching age 18 II. must be established prior to the beneficiary reaching age 26 III. Is used to pay only for the medical expenses incurred by a disabled individual IV. Is used to pay for the qualified ongoing expenses incurred by a disabled individual A. I and III B. I and IV C. II and III D. II and IV

D. II and IV

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

Which statements are TRUE? I. Contributions to a 529 plan are tax deductible II. Contributions to a 529 plan are not tax deductible III. Contributions to a Coverdell ESA are tax deductible IV. Contributions to a Coverdell ESA are not tax deductible 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

LGIPs

Local Government Investment Pool -investment fund set up under state law -only offered local municipal governmental entities in that state.