Finra Exam SIE Topic 4 Question 4 Discussion

Actual exam question for Finra's SIE exam

Question #: 4
Topic #: 4

[All SIE Questions]

How long are unused funds permitted to remain in a Coverdell education savings account?

AAll funds must be distributed when the beneficiary's age reaches 21 years old.

BAll funds must be distributed when the beneficiary's age reaches 30 years old.

CAll funds must be distributed when the beneficiary's age reaches 59 years old.

DThere is no age limit preventing funds from remaining in a beneficiary's account.

Show Suggested Answer

Suggested Answer: B

Coverdell Education Savings Accounts (ESAs) require that all funds be distributed by the time the beneficiary reaches 30 years old. If the funds are not used for qualified educational expenses, they may be subject to taxes and penalties.

B is correct because funds must be distributed by age 30 unless transferred to another eligible family member.

A is incorrect as age 21 is not relevant for Coverdell ESAs.

C is incorrect because age 59 applies to retirement accounts like IRAs.

D is incorrect because there is a distribution deadline for Coverdell accounts.

by Brynn at Feb 11, 2025, 08:30 AM

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Yuonne

2 months ago

I'm not sure, but I think it's D too. It makes sense to allow funds to remain in the account indefinitely.

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Apolonia

2 months ago

I agree with Kerrie, there is no age limit for funds to remain in the account.

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Elizabeth

2 months ago

Haha, 59 years old? Who would ever let their kid's education savings sit that long? C is just silly.

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Shenika

2 months ago

This is a classic trick question. The answer is obviously A - you have to use the funds by 21, no exceptions!

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Dorcas

1 months ago

I'm pretty sure it's A, you have to use the funds by age 21.

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Sarah

1 months ago

Actually, it's C, all funds must be distributed by age 59.

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Lacresha

2 months ago

No, I believe the correct answer is D, there is no age limit for the funds.

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Tomoko

2 months ago

I think the answer is A, all funds must be distributed by age 21.

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Kerrie

2 months ago

I think the answer is D.

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Eulah

2 months ago

D sounds like the right answer to me. There's no age limit on the funds, you can keep them in the account as long as you need them for education.

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Kimberely

3 months ago

Hmm, I was pretty sure it was 21 years old. This is tricky, I better double-check that.

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Chana

3 months ago

I think the answer is B. The beneficiary has until 30 years old to use the funds, right?

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Melina

29 days ago

Good to know, thanks for the clarification.

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Arminda

1 months ago

Yes, it's important to distribute the funds before the beneficiary turns 21.

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Ricki

1 months ago

Oh, I see. I thought there was more time to use the funds.

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Ethan

2 months ago

No, the correct answer is A) All funds must be distributed when the beneficiary's age reaches 21 years old.

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Micah

2 months ago

B) All funds must be distributed when the beneficiary's age reaches 30 years old.

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Jame

2 months ago

A) All funds must be distributed when the beneficiary's age reaches 21 years old.

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