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

Who is responsible for funding a 529 plan?

1. The beneficiary

2. The donor

3. The State

4. The educational institution

The correct answer is: The donor

The correct answer is the donor, as they are the ones who contribute funds to the 529 plan. In a 529 plan, which is a tax-advantaged savings plan designed to encourage saving for future education costs, the individual or entity that makes contributions is referred to as the donor. The beneficiary is the person for whom the funds are intended, typically a student, but they do not provide the funding themselves. The state does play a role in the establishment and regulation of 529 plans, but it does not fund individual accounts. Lastly, educational institutions do not fund the plans; rather, they benefit from the money withdrawn from the 529 accounts when the donor or beneficiary pays for qualified education expenses. Therefore, it is the donor's responsibility to ensure that contributions are made to the 529 plan for educational savings.