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

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How much can be contributed annually to a Coverdell Education Savings Plan?

$500
$2,000
$5,000
$10,000

The correct answer is: $2,000

The Coverdell Education Savings Plan allows individuals to contribute up to a maximum of $2,000 per beneficiary per year. This annual contribution limit applies throughout the entire duration of the account, meaning that regardless of how many years the account is funded, the total contribution for each individual beneficiary cannot exceed this limit annually. The funds in a Coverdell account can be used for qualified education expenses, which include tuition and fees, book costs, and other necessary supplies for kindergarten through college. The tax advantages of this plan, including tax-free growth and tax-free withdrawals for qualified education expenses, add to the appeal of this savings option for families planning for educational costs. Understanding this contribution limit is essential for individuals who want to ensure they maximize their contributions effectively without exceeding the established annual thresholds.