FPQP Education Planning 3

Question 1

If a 529 plan distribution is used for non-qualified expenses, the earnings portion of the withdrawal is subject to:

Accepted Answer

Ordinary income tax plus a 10% federal penalty

Answer

Non-qualified 529 withdrawals trigger ordinary income tax on the earnings portion plus a 10% federal penalty tax.

Question 2

Which of the following strategies can help reduce a student's financial aid impact when holding assets in a UTMA account?

Accepted Answer

Transfer assets to a parent-owned 529 plan before applying for aid

Answer

Moving UTMA assets to a parent-owned 529 shifts the assessment rate from 20% (student) to a maximum of 5.64% (parent), improving aid eligibility.

Question 3

Under current tax law, up to how much per year per beneficiary can be withdrawn from a 529 plan tax-free for K-12 tuition?

Accepted Answer

$10,000

Answer

The Tax Cuts and Jobs Act of 2017 expanded 529 plans to allow up to $10,000 per year per beneficiary for K-12 tuition at public, private, or religious schools.

Question 4

A 529 plan beneficiary change to a family member of the original beneficiary is:

Accepted Answer

A tax-free rollover if done properly

Answer

Changing the beneficiary to a member of the original beneficiary's family is a tax-free rollover with no penalty, as long as it qualifies as a family member under IRS rules.

Question 5

Which of the following education-related expenses qualifies under the American Opportunity Tax Credit (AOTC)?

Accepted Answer

Course-related books, supplies, and equipment

Answer

The AOTC covers tuition, fees, and course-related books, supplies, and equipment required for enrollment; room/board and transportation do not qualify.

FPQP - Financial Paraplanner Qualified Professional Practice Test

FPQP - Financial Paraplanner Qualified Professional Practice Test

FPQP Education Planning 3