American College Exam HS330 Topic 1 Question 85 Discussion

Actual exam question for American College's HS330 exam

Question #: 85
Topic #: 1

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:

AThe trust must be irrevocable.

BThe father's annual gift tax exclusion must be reduced by any amount used to pay college tuition costs.

CAny accumulated income and all trust principal must be available for distribution to the son when he attains age 21.

DIn the event of the son's death prior to age 21, trust assets must either be payable to the son's estate or be subject to a general power of appointment held by the son.

Show Suggested Answer

Suggested Answer: D

by Emilio at Apr 25, 2024, 09:12 PM

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Felicitas

8 months ago

I believe that in that case, the trust assets must either be payable to the son's estate or be subject to a general power of appointment held by the son.

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Steffanie

8 months ago

But what about D) In the event of the son's death prior to age 21, what happens to the trust assets?

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Lynsey

9 months ago

I think the trust must be irrevocable to ensure that the assets are protected for the son's education.

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Kattie

9 months ago

I'm not sure about the answer. Can someone explain why the trust must be irrevocable?

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Alishia

10 months ago

I disagree. I believe the answer is C) Any accumulated income and all trust principal must be available for distribution to the son when he attains age 21.

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