American College Exam HS330 Topic 3 Question 94 Discussion

Actual exam question for American College's HS330 exam

Question #: 94
Topic #: 3

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 Kindra at Aug 04, 2024, 09:37 AM

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Shayne

3 months ago

Hold up, the trust assets have to go to the son's estate if he dies before 21? That's a real bummer. I feel for the kid, but I guess it's all part of the plan.

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Novella

2 months ago

So the trust has to be irrevocable, right?

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Romana

3 months ago

Yeah, it's tough but it's to make sure the funds are used for his education.

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Dyan

3 months ago

Ha! 'General power of appointment'? Sounds like something out of a spy novel. This test is getting too fancy for my liking.

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Flo

3 months ago

You're right, I missed that detail. A is the correct answer then.

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Anjelica

3 months ago

Hmm, the trust assets have to be available when the son turns 21? That's a pretty big deal. Hope the father knows what he's getting into.

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Denise

3 months ago

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

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Wava

3 months ago

A: The trust must be irrevocable.

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Jamal

3 months ago

But doesn't the trust need to be irrevocable?

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Flo

4 months ago

I disagree, I believe the correct answer is C.

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Lacresha

4 months ago

Wait, so the father can't use the gift tax exclusion to pay for the son's college tuition? That doesn't seem fair. Gotta double-check that one.

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Larae

4 months ago

In 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.

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Corrinne

4 months ago

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

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Lili

4 months ago

The trust must be irrevocable.

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Jamal

4 months ago

I think the correct answer is B.

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Carri

4 months ago

Whoa, this question is a real mind-bender! I thought the trust had to be irrevocable, but now I'm not so sure. Guess I better brush up on my IRC Section 2503(c) trust knowledge.

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Lindsey

3 months ago

D) In 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.

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