10.3 Special Accounts (Education and Health)
Special tax-advantaged vehicles enable families to accumulate wealth for higher education, healthcare liabilities, and minor children with significant tax preferences.
Key NASAA Exam Takeaways
- Section 529 College Savings Plans offer state-sponsored tax-free withdrawals for qualified higher education and up to $10,000/year for K-12 tuition.
- 529 Rollovers to Roth IRAs: Up to a lifetime limit of $35,000 in unused 529 funds can be rolled over to the beneficiary's Roth IRA (subject to annual contribution limits and 15-year account age rule).
- Coverdell ESAs allow after-tax contributions up to $2,000 per child per year until age 18, subject to income phase-outs.
- Health Savings Accounts (HSAs) provide triple-tax advantage: tax-deductible contributions, tax-free growth, and tax-free withdrawals for qualified medical expenses.
- UGMA/UTMA accounts are irrevocable custodial gifts belonging unconditionally to the minor.
Knowledge Checkpoint • Section 10.3
Which of the following accounts provides a 'triple tax advantage' (pre-tax contributions, tax-free growth, and tax-free withdrawals for qualified expenses)?