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

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What is the maximum allowable contribution to a 529 plan in most states?

$10,000
$20,000
$30,000
$50,000

The correct answer is: $30,000

The maximum allowable contribution to a 529 plan varies by state, but many states have very high limits that far exceed the amounts provided in the options. In fact, some states allow contributions in excess of $300,000 per beneficiary over the life of the account. The choice indicating $30,000 reflects a reasonable contribution for a single year's gift tax exclusion, as the annual gift exclusion is set at $17,000 per individual for 2023, which allows a married couple to contribute up to $34,000 without incurring gift taxes if they elect to split gifts. This aligns with the concept of financial planning for education expenses, where the 529 plan is used as a tax-advantaged way to save for future education costs. It is important to understand that while there are no annual contribution limits other than the federal gift tax exclusion, individual states do impose limits on total contributions made to a beneficiary's account, which often allows for high accumulations over time. In summary, while the specified figures in the options might not represent the full picture of contribution limits, $30,000 is very much in line with typical contribution planning, especially under consideration of the annual limits on gifts.