American College Exam HS330 Topic 3 Question 118 Discussion

Actual exam question for American College's HS330 exam

Question #: 118
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: B

by Jimmie at Oct 28, 2025, 06:35 PM

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Erin

3 days ago

Hmm, I'm a bit confused on the gift tax exclusion part. I'll have to make sure I understand how that works with a 2503(c) trust before I can confidently answer this.

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Marlon

9 days ago

Okay, I think I've got this. The key is to identify the one statement that is not correct. I'll need to double-check my understanding of the rules around distributions, powers of appointment, and the impact on the gift tax exclusion.

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Gregoria

14 days ago

This seems like a tricky question about the rules for a 2503(c) trust. I'll need to carefully review the details on the requirements for this type of trust.

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