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1.
What's the biggest drawback to a Uniform Gift to Minors Act account?
You eventually surrender control of the account to the recipient. You can contribute much more than $500 each year, and withdrawals are taxed at the recipient's rate. However, the recipient gains control of the account. If she doesn't want to spend the proceeds on college, she doesn't have to.
2.
What is the current contribution limit to a Coverdell education savings account?
$2,000. This is the current limit.
3.
When it comes to qualifying for financial aid, how much money you earn every year will be more important to a financial aid office than your stock portfolio.
True. Financial aid offices consider income more heavily.
4.
With a prepaid tuition plan, you can control what the plan invests in.
False. The state controls what the plan invests in.
5.
If you'll be sending your child to college in five years, her college portfolio should _______.
Resemble an intermediate-term portfolio. A college portfolio should become tamer as the student gets closer to matriculating. The idea is to protect the gains instead of angling for more.
6.
If you are using a Roth IRA for college expenses, who will ultimately control who gets to spend the money?
You. Unlike a few other college-savings options, you control the money in a Roth IRA.
7.
Section 529 plans are sponsored by _______.
States. States set contribution limits and investment guidelines that the plans must follow.
8.
Emily withdrew $10,000 from her traditional IRA with the intention of using it to pay for her college expenses. But after the withdrawal, she decided to put the money toward a car. Because she originally intended to use the money for college, she won't be charged a penalty.
False. The intention does not matter. Only the actual use matters. Therefore, she will be charged a penalty.
