RFC Education Funding Planning 2

Question 1

A married couple wants to superfund a 529 plan for their newborn grandchild. What is the maximum lump-sum contribution they can make using the 5-year gift tax averaging election?

Accepted Answer

$180,000

Answer

A married couple can each contribute $18,000 × 5 years = $90,000, for a combined total of $180,000 under the 5-year election (2024 annual exclusion amounts).

Question 2

Which of the following expenses is NOT a qualified expense for the American Opportunity Tax Credit (AOTC)?

Accepted Answer

Room and board

Answer

The AOTC covers tuition, required fees, and course-related books and supplies, but room and board is not a qualified expense.

Question 3

A parent has a 529 plan with a $50,000 balance for a child who decides not to attend college. Which option avoids the 10% penalty on the earnings?

Accepted Answer

Roll over the balance to a Roth IRA for the beneficiary (subject to lifetime limit)

Answer

Under the SECURE 2.0 Act, unused 529 funds can be rolled into a Roth IRA for the beneficiary (up to a $35,000 lifetime limit), avoiding the 10% penalty.

Question 4

For federal financial aid purposes, a 529 plan owned by a dependent student's parent is reported on the FAFSA at what assessment rate?

Accepted Answer

5.64% of the account value

Answer

Parent-owned 529 plans are treated as parental assets on the FAFSA and assessed at a maximum rate of 5.64%, which is much more favorable than student-owned assets.

Question 5

The Lifetime Learning Credit (LLC) differs from the American Opportunity Tax Credit (AOTC) in that the LLC:

Accepted Answer

Has no limit on the number of years it can be claimed

Answer

Unlike the AOTC which is limited to four years, the Lifetime Learning Credit can be claimed for an unlimited number of years of post-secondary education.

(RFC) Registered Financial Consultant Practice Test

(RFC) Registered Financial Consultant Practice Test

RFC Education Funding Planning 2