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American College Exam HS330 Topic 1 Question 83 Discussion

Actual exam question for American College's HS330 exam
Question #: 83
Topic #: 1
[All HS330 Questions]

A father wants to accumulate funds for his 12-year-old son's college education. On the advice of his attorney, the father establishes an IRC Section 2503(c) trust and funds it with annual gifts. All the following statements concerning this arrangement are correct EXCEPT:

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Suggested Answer: D

by Willodean at Mar 18, 2024, 09:32 AM

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Leontine
10 months ago
I think the answer is C, because all the income and principal should be available to the son when he turns 21.
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Jani
10 months ago
I see your point, Barney. That does make sense for the trust assets to go to the son's estate.
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Barney
10 months ago
But what about option D? Shouldn't the trust assets be payable to the son's estate in case of his death?
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Luisa
10 months ago
I agree with you, Jani. It makes sense that the exclusion should remain unaffected.
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Jani
10 months ago
I think the answer is B, because the father's gift tax exclusion should not be affected by paying tuition costs.
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Iesha
10 months ago
That's also correct. It ensures that the funds are ultimately used for the son's benefit.
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Celeste
10 months ago
What about the requirement that any accumulated income and trust principal must be available for distribution to the son at age 21?
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Moira
11 months ago
That's true. It helps ensure that the funds are used for the intended purpose of college education.
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Dominque
11 months ago
I believe the father's annual gift tax exclusion must also be reduced by any amount used to pay college tuition costs.
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Maxima
11 months ago
Yes, that's correct. It's one of the requirements for the IRC Section 2503(c) trust.
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Iesha
11 months ago
I think the trust must be irrevocable, right?
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