Chapter 2 Practice Questions
1. If the beneficiary of a 529 savings plan dies, the contributor can do any of the following except:
A. Distribute the funds to the beneficiary’s estate, which would subject the funds to estate taxation.
B. Return the funds to himself, with earnings subject to tax, but incurring no penalty fee.
C. Roll over the plan by designating a new beneficiary who is a qualified family member, tax-free.
D. Use the account as security for a loan to benefit the beneficiary’s estate.
2. For a 529 plan, all of the following are qualified education expenses for except:
A. Tuition
B. Services for special needs students
C. Books
D. Room and board for all students
3. A 529 savings plan can be opened through:
A. An authorized investment firm, often referred to as an advisor-sold plan
B. The state or its primary distributor, often referred to as a direct-sold plan
C. A selling dealer, a municipal securities dealer other than the state’s primary distributor
D. All of the above
4. Municipal fund securities are distinguished from mutual funds by their:
A. Sellers
B. Issuers
C. Investors
D. Underlying investments
5. Which one of the following statements about LGIPs is true?
A. Anyone can invest in an LGIP by purchasing a share.
B. If an LGIP is managed by government employees, MSRB disclosures are not required.
C. Although LGIPs are issued by state or local governments, federal law establishes LGIP requirements and investment objectives.
D. Withdrawals from LGIPs are only allowed for qualified educational expenses.
6. Which of the following is typically not a benefit of an LGIP?
A. Diversification
B. Liquidity
C. High returns
D. Exemption from federal taxation
7. Which of the following investments has the broadest set of potential uses?
A. CESA
B. 529 plan
C. UGMA account
D. Educational savings bond
8. Who maintains control over a 529 savings plan ac