Investment Company and Variable Contracts Products Representative (Series 6)Practice Exam

Disable ads (and more) with a membership for a one time $2.99 payment

Enhance your skills with the Series 6 exam. Access comprehensive flashcards and multiple choice questions, with detailed hints and explanations. Prepare confidently for your licensing test!

Each practice test/flash card set has 50 randomly selected questions from a bank of over 500. You'll get a new set of questions each time!

Practice this question and more.

What is the maximum amount a donor can give to a 529 plan without incurring gift tax?

$10,000
$13,000
$15,000
$20,000

The correct answer is: $13,000

The correct answer regarding the maximum amount a donor can contribute to a 529 plan without incurring gift tax is based on the annual gift tax exclusion. As of the most recent tax regulations, the annual gift tax exclusion allows individuals to gift up to a specified amount to any individual without triggering the federal gift tax. For 2021, this exclusion was set at $15,000 per donor per recipient. However, contributions to a 529 plan have a unique provision that allows donors to front-load contributions. This means that donors can make a lump-sum contribution that utilizes several years' worth of the annual exclusion, allowing for a much larger total contribution without gift tax implications if they follow the proper rules. The amount of $13,000 indicated in the answer corresponds to the previous annual gift tax exclusion amount before it was increased to $15,000 in 2018. Currently, with the adjustment of the exclusion amount, individuals can contribute up to $15,000 to a 529 plan without incurring gift tax, making the maximum contribution much more favorable for planning education savings. Understanding the annual exclusion amount is key to maximizing contributions to a 529 plan without gift tax considerations, which is beneficial for education funding strategies.