PFS Education Planning & Financial Analysis

Question 1

What is the maximum annual contribution per beneficiary to a Coverdell Education Savings Account (ESA)?

Accepted Answer

$2,000

Answer

The annual contribution limit for a Coverdell ESA is $2,000 per beneficiary from all contributors combined, subject to contributor income phase-outs.

Question 2

A 529 college savings plan's primary federal tax advantage is:

Accepted Answer

Tax-free growth and tax-free withdrawals for qualified education expenses

Answer

At the federal level, 529 plan earnings grow tax-deferred and qualified withdrawals for education expenses are completely income-tax-free.

Question 3

The 529 plan 'superfunding' strategy (5-year gift tax averaging) allows a contributor to:

Accepted Answer

Front-load up to 5 years' worth of annual gift tax exclusions into a 529 in one year

Answer

Superfunding lets a contributor elect to treat a large one-time 529 contribution as if made equally over 5 years, using up to 5× the annual gift tax exclusion without gift tax.

Question 4

UGMA/UTMA custodial accounts differ from 529 plans most significantly because UGMA/UTMA assets:

Accepted Answer

Become the minor's unrestricted property at the age of majority

Answer

UGMA/UTMA assets legally transfer to and become the minor's own property at age 18–21 (varies by state) and may be spent on anything, not just education.

Question 5

Under the FAFSA formula, student-owned assets are assessed at what rate versus parent-owned assets?

Accepted Answer

A higher rate—20% for student assets vs. up to 5.64% for parent assets

Answer

FAFSA assesses student-owned assets at 20% of value but parent-owned assets at a maximum of only 5.64%, so parent-owned 529 accounts are more favorable for financial aid eligibility.

(PFS) Personal Financial Specialist Practice Test

(PFS) Personal Financial Specialist Practice Test

PFS Education Planning & Financial Analysis