Question 1

Are there major drawbacks to the Section 529 plan?

Accepted Answer

Yes. The drawbacks are as follows: (a) It is a long term plan, (b) While withdrawals are tax-free, they are still treated as income to the child, (c) Section 529 plans typically provide limited investment choices, and (d) It is difficult to transfer funds out of such a plan.

Question 2

What are some of the other investment options available for saving for college?

Accepted Answer

The other investment options a...

Question 3

Why is it inappropriate to scare parents with college cost figures?

Accepted Answer

That can be too demotivating. Instead, t...

Question 4

What steps can be taken to reduce the expected family contribution?

Accepted Answer

The following steps can be taken: (a) Th...

Question 5

Coverdell ESAs combine the following features: 
I. Contribution is allowed up to $2,000 per year
II. Investments are tax-deferred, but withdrawals are taxable
III. They adversely affect financial aid application
IV. Contributions are controlled by parents
The correct answer is:

Accepted Answer

A)   I, II, and III
B)   II, III, and IV
C)   I, III, and IV
D)   I, II, and IV

Question 6

Which of the following would be most suitable for funding a college education that commences in three years?

Accepted Answer

A)   Stock mutual fund
B)   Bond mutual fund
C)   Zero-coupon bond with a maturity that matches the start date
D)   Checking account at the local bank C

Question 7

What are the major sources of student aid?

Accepted Answer

The major sources of student a...

Question 8

Coverdell ESAs cover each of the listed items except:

Accepted Answer

A)   Books
B)   Computer hardware and software
C)   Student's car loan payments
D)   Tuition

Question 9

Major drawbacks of Section 529 plans are:
 I)  You must start early to derive significant benefits
II)  They could result in a decrease in the amount of the financial aid
III)  Once you join a plan, you cannot open an Educational IRA
The correct answer is:

Accepted Answer

A)   I and II
B)   II and III
C)   I and III
D)   I, II, and III

Question 10

Treasury Inflation Indexed Securities:

Accepted Answer

A)   Cannot be used for college savings
B)   Can be used for college savings
C)   Have maturities of 3 to 5 years
D)   Are sold in denomination of 1,000 only

Question 11

Are there arguments against saving in a child's name?

Accepted Answer

Here are some compelling arguments: (a) ...

Question 12

Your client, Joan Key, is flabbergasted after learning how educational costs are skyrocketing. In fact, she is turned off and refuses to plan for her children's education. What should you do?

Accepted Answer

Explain to Joan that it is unwise to sto...

Question 13

Which of the following statements about a Coverdell ESA is not correct?

Accepted Answer

A)   Taxpayers may be phased out from contributing to a Coverdell ESA because of their level of modified adjusted gross income
B)   Assets in a Coverdell ESA accumulate on a tax-deferred basis and earnings are tax-free is used for qualified educational purposes
C)   Coverdell assets can be used for elementary, secondary and higher education
D)   Every contributor can make an annual $2,000 contribution to a Coverdell for the same beneficiary

Question 14

Donor may change beneficiary for the following plans:
I. Section 529
II. UGMA/UTMA
III. Coverdell ESAs
The correct answer is:

Accepted Answer

A)   I & II
B)   I only
C)   III only
D)   II and III

Question 15

Allan Morton has decided to save for education in his son's name, because, as he puts it, "it is tax wise." Do you agree? What is your advice?

Accepted Answer

Allan is right in his assertion that saving in his son's name has tax advantages. However, you should also point out that there are several arguments against investing in a child's name. See page 301 for details.

Question 16

Section 529 plans have the following benefits:
 I)  Education expenses qualifying for the Lifetime Learning Credit can be paid with plan withdrawals
II)  The contributor retains ownership rights and the money remains in his/her estate
III)  Tuition credits can be transferred to another qualified tuition program for the same beneficiary
The correct answer is:

Accepted Answer

A)   None of the above
B)   II only
C)   I and III
D)   I only

Question 17

Explain Coverdell ESAs.

Accepted Answer

The Tax Act of 1997 created a tax-favore...

Question 18

All of these are true for education tax incentives except the following statement:

Accepted Answer

A)   Employer education is typically a tax write-off for the employer and non-taxable income for the employee
B)   Student loan interest subject to some stipulations)  can be used to reduce adjusted gross income
C)   The Life Long Learning Credit and the American Opportunity Credit Hope Credit)  can both be used by the same taxpayer to reduce taxes in the same calendar year.
D)   Educational expenses may qualify as an itemized deduction

Question 19

Comment on the following: "Section 529 plans are the best thing since the slice bread was invented."

Accepted Answer

Section 529 offers significant...

Question 20

Persons unable to repay student loans can use:
 I)  Deferment
II)  Forbearance
III)  Graduated Payment
IV)  Consolidation
The correct answer is:

Accepted Answer

A)   I, II, and IV
B)   I, III, and IV
C)   I and IV
D)   I, II, III, and IV

Exam 7: Educational Planning

Are there major drawbacks to the Section 529 plan?

Correct Answer
verified
Yes. The drawbacks are as follows: (a) It is a long term plan, (b) While withdrawals are tax-free, they are still treated as income to the child, (c) Section 529 plans typically provide limited investment choices, and (d) It is difficult to transfer funds out of such a plan.

What are some of the other investment options available for saving for college?

Correct Answer
verified
The other investment options a...
View Answer

Why is it inappropriate to scare parents with college cost figures?

Correct Answer
verified
That can be too demotivating. Instead, t...
View Answer

What steps can be taken to reduce the expected family contribution?

Correct Answer
verified
The following steps can be taken: (a) Th...
View Answer

Coverdell ESAs combine the following features: I. Contribution is allowed up to $2,000 per year II. Investments are tax-deferred, but withdrawals are taxable III. They adversely affect financial aid application IV. Contributions are controlled by parents The correct answer is:

Correct Answer
verified

Which of the following would be most suitable for funding a college education that commences in three years?

Correct Answer
verified
C

What are the major sources of student aid?

Correct Answer
verified
The major sources of student a...
View Answer

Coverdell ESAs cover each of the listed items except:

Correct Answer
verified

Major drawbacks of Section 529 plans are: I) You must start early to derive significant benefits II) They could result in a decrease in the amount of the financial aid III) Once you join a plan, you cannot open an Educational IRA The correct answer is:

Correct Answer
verified

Treasury Inflation Indexed Securities:

Correct Answer
verified

Are there arguments against saving in a child's name?

Correct Answer
verified
Here are some compelling arguments: (a) ...
View Answer

Your client, Joan Key, is flabbergasted after learning how educational costs are skyrocketing. In fact, she is turned off and refuses to plan for her children's education. What should you do?

Correct Answer
verified
Explain to Joan that it is unwise to sto...
View Answer

Which of the following statements about a Coverdell ESA is not correct?

Correct Answer
verified

Donor may change beneficiary for the following plans: I. Section 529 II. UGMA/UTMA III. Coverdell ESAs The correct answer is:

Correct Answer
verified

Allan Morton has decided to save for education in his son's name, because, as he puts it, "it is tax wise." Do you agree? What is your advice?

Correct Answer
verified
Allan is right in his assertion that saving in his son's name has tax advantages. However, you should also point out that there are several arguments against investing in a child's name. See page 301 for details.

Correct Answer
verified

Explain Coverdell ESAs.

Correct Answer
verified
The Tax Act of 1997 created a tax-favore...
View Answer

All of these are true for education tax incentives except the following statement:

Correct Answer
verified

Comment on the following: "Section 529 plans are the best thing since the slice bread was invented."

Correct Answer
verified
Section 529 offers significant...
View Answer

Persons unable to repay student loans can use: I) Deferment II) Forbearance III) Graduated Payment IV) Consolidation The correct answer is:

Correct Answer
verified

Exam 7: Educational Planning

Are there major drawbacks to the Section 529 plan?

Correct AnswerverifiedYes. The drawbacks are as follows: (a) It is a long term plan, (b) While withdrawals are tax-free, they are still treated as income to the child, (c) Section 529 plans typically provide limited investment choices, and (d) It is difficult to transfer funds out of such a plan.

What are some of the other investment options available for saving for college?

Correct AnswerverifiedThe other investment options a...View AnswerShow Answer

Why is it inappropriate to scare parents with college cost figures?

Correct AnswerverifiedThat can be too demotivating. Instead, t...View AnswerShow Answer

What steps can be taken to reduce the expected family contribution?

Correct AnswerverifiedThe following steps can be taken: (a) Th...View AnswerShow Answer

Coverdell ESAs combine the following features: I. Contribution is allowed up to $2,000 per year II. Investments are tax-deferred, but withdrawals are taxable III. They adversely affect financial aid application IV. Contributions are controlled by parents The correct answer is:

Correct AnswerverifiedShow Answer

Which of the following would be most suitable for funding a college education that commences in three years?

Correct AnswerverifiedC

What are the major sources of student aid?

Correct AnswerverifiedThe major sources of student a...View AnswerShow Answer

Coverdell ESAs cover each of the listed items except:

Correct AnswerverifiedShow Answer

Major drawbacks of Section 529 plans are: I) You must start early to derive significant benefits II) They could result in a decrease in the amount of the financial aid III) Once you join a plan, you cannot open an Educational IRA The correct answer is:

Correct AnswerverifiedShow Answer

Treasury Inflation Indexed Securities:

Correct AnswerverifiedShow Answer

Are there arguments against saving in a child's name?

Correct AnswerverifiedHere are some compelling arguments: (a) ...View AnswerShow Answer

Your client, Joan Key, is flabbergasted after learning how educational costs are skyrocketing. In fact, she is turned off and refuses to plan for her children's education. What should you do?

Correct AnswerverifiedExplain to Joan that it is unwise to sto...View AnswerShow Answer

Which of the following statements about a Coverdell ESA is not correct?

Correct AnswerverifiedShow Answer

Donor may change beneficiary for the following plans: I. Section 529 II. UGMA/UTMA III. Coverdell ESAs The correct answer is:

Correct AnswerverifiedShow Answer

Allan Morton has decided to save for education in his son's name, because, as he puts it, "it is tax wise." Do you agree? What is your advice?

Correct AnswerverifiedAllan is right in his assertion that saving in his son's name has tax advantages. However, you should also point out that there are several arguments against investing in a child's name. See page 301 for details.

Correct AnswerverifiedShow Answer

Explain Coverdell ESAs.

Correct AnswerverifiedThe Tax Act of 1997 created a tax-favore...View AnswerShow Answer

All of these are true for education tax incentives except the following statement:

Correct AnswerverifiedShow Answer

Comment on the following: "Section 529 plans are the best thing since the slice bread was invented."

Correct AnswerverifiedSection 529 offers significant...View AnswerShow Answer

Persons unable to repay student loans can use: I) Deferment II) Forbearance III) Graduated Payment IV) Consolidation The correct answer is:

Correct AnswerverifiedShow Answer

Correct Answer
verified
Yes. The drawbacks are as follows: (a) It is a long term plan, (b) While withdrawals are tax-free, they are still treated as income to the child, (c) Section 529 plans typically provide limited investment choices, and (d) It is difficult to transfer funds out of such a plan.

Correct Answer
verified
The other investment options a...
View Answer

Correct Answer
verified
That can be too demotivating. Instead, t...
View Answer

Correct Answer
verified
The following steps can be taken: (a) Th...
View Answer

Correct Answer
verified

Correct Answer
verified
C

Correct Answer
verified
The major sources of student a...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
Here are some compelling arguments: (a) ...
View Answer

Correct Answer
verified
Explain to Joan that it is unwise to sto...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
Allan is right in his assertion that saving in his son's name has tax advantages. However, you should also point out that there are several arguments against investing in a child's name. See page 301 for details.

Correct Answer
verified

Correct Answer
verified
The Tax Act of 1997 created a tax-favore...
View Answer

Correct Answer
verified

Correct Answer
verified
Section 529 offers significant...
View Answer

Correct Answer
verified