Question

9
which of the following is a characteristic of the 529 plan that makes it different from the coverdell education savings account?
a. withdrawals are not federally taxed.
b. the beneficiary can be changed to another family member.
c. there is no age limit for disbursement of funds.
d. anyone can open an account for the beneficiary.

Explanation:

Both 529 plans and Coverdell Education Savings Accounts (ESA) offer tax-free withdrawals for qualified education expenses (eliminating A). Both allow changing beneficiaries to family members (eliminating B). Both can be opened by anyone for a beneficiary (eliminating D). A key difference is that Coverdell ESAs require funds to be disbursed by the beneficiary’s 30th birthday, while 529 plans have no age limit for disbursement.

Answer:

C. There is no age limit for disbursement of funds.