Under SECURE 2.0, an individual can roll over 529 plan funds to a Roth IRA. Which requirement must be met?

The 529 account must be open for at least 15 years. The 529-to-Roth IRA rollover requires the 529 account to be open for at least 15 years. The rollover is NOT subject to Roth income limits, making it valuable for high earners.

Which account type offers a "triple tax advantage"?

Health Savings Account (HSA). HSAs offer triple tax benefits: tax-deductible contributions, tax-free growth, and tax-free withdrawals for qualified medical expenses. No other account provides all three benefits.

A 16-year-old has $5,000 in unearned income from an UTMA account. Under the kiddie tax rules, how is this income taxed?

$1,300 tax-free, $1,300 at child's rate, $2,400 at parent's rate. Under kiddie tax rules: first $1,300 is tax-free, next $1,300 is at child's rate, and the remaining $2,400 ($5,000 - $2,600) is taxed at the parent's marginal rate.

What is the maximum HSA contribution for a family with two parents age 56 and 58 in 2025?

$10,550. The 2025 family HSA limit is $8,550. Each spouse over 55 can add a $1,000 catch-up contribution. However, catch-up contributions must be made to separate HSAs. Total: $8,550 + $1,000 + $1,000 = $10,550.

Special Accounts — Free Series 66 Guide 2026

Special Accounts

Several account types offer significant tax advantages for specific purposes like education and healthcare.

Education Savings Accounts

529 Plans (Qualified Tuition Programs)

529 plans are the most popular education savings vehicle, offering tax-free growth for qualified expenses.

Feature	Details
Contributions	After-tax; state deduction may apply
Growth	Tax-deferred
Qualified withdrawals	Tax-free
Contribution limits	High (varies by state; typically $300,000+)
Income limits	None for contributions
Control	Account owner retains control

Qualified Education Expenses

Expense Category	529 Coverage
College tuition and fees	✓ Unlimited
Room and board	✓ If enrolled at least half-time
Books and supplies	✓ Required for enrollment
K-12 tuition and listed K-12 expenses	✓ Up to $20,000/year from 2026
Student loan repayment	✓ Up to $10,000 lifetime
Apprenticeship programs	✓ Registered programs
Computer equipment	✓ If required for enrollment

529-to-Roth IRA Rollover (SECURE 2.0)

Starting in 2024, unused 529 funds can be rolled into a Roth IRA for the beneficiary:

Requirement	Details
Lifetime limit	$35,000 per beneficiary
Annual limit	Subject to Roth IRA contribution limit ($7,500 in 2026)
Account age	529 must be open at least 15 years
Contribution age	Contributions in last 5 years not eligible
Earned income	Beneficiary must have earned income ≥ rollover amount
Income limits	NOT subject to Roth income limits
Beneficiary	Must be same person as 529 beneficiary

Key benefit: High earners normally ineligible for Roth contributions can use this strategy.

Coverdell Education Savings Account (ESA)

Feature	Details
Contribution limit	$2,000/year per beneficiary
Income limits	Phase out: $95K-$110K (single), $190K-$220K (MFJ)
Qualified expenses	K-12 AND college expenses
Age limit	Must use by age 30 (unless special needs)
Contribution deadline	April 15 of following year
Investment options	Self-directed (stocks, bonds, mutual funds)

529 vs. Coverdell Comparison

Feature	529 Plan	Coverdell ESA
Contribution limit	Very high (state-based)	$2,000/year
Income limits	None	Yes (phase out)
K-12 expenses	Tuition and listed expenses, up to $20,000/year from 2026	Broader list, including school-required uniforms and transportation
Age restrictions	None	Must use by 30
Investment choices	Limited options	Self-directed
State tax deduction	Often available	No

Health Savings Accounts (HSAs)

HSAs offer the only "triple tax advantage" in the tax code.

The Triple Tax Advantage

Tax-deductible contributions - Reduce taxable income
Tax-free growth - Investment earnings not taxed
Tax-free withdrawals - For qualified medical expenses

2025 HSA Contribution Limits

Coverage Type	Limit
Individual (self-only)	$4,300
Family	$8,550
Catch-up (age 55+)	Additional $1,000

HSA Eligibility Requirements

To contribute to an HSA, you must:

Be covered by a High-Deductible Health Plan (HDHP)
NOT be covered by other non-HDHP health insurance
NOT be enrolled in Medicare
NOT be claimed as a dependent on someone else's tax return

2025 HDHP Requirements

Requirement	Individual	Family
Minimum deductible	$1,650	$3,300
Maximum out-of-pocket	$8,300	$16,600

HSA vs. FSA Comparison

Feature	HSA	FSA
Rollover	Unlimited - yours forever	Use-it-or-lose-it (limited rollover)
Portability	Yes - stays with you	Tied to employer
Investment	Yes - can invest funds	No
HDHP required	Yes	No
Contribution source	Employee or employer	Employee (employer can contribute)

HSA After Age 65

Withdrawals for ANY purpose are penalty-free (but taxed as income if non-medical)
Medical withdrawals remain tax-free
Can continue to use for qualified medical expenses indefinitely
Cannot contribute if enrolled in Medicare

UTMA/UGMA Custodial Accounts

Uniform Transfers to Minors Act (UTMA) and Uniform Gifts to Minors Act (UGMA) allow adults to transfer assets to minors.

Feature	Details
Ownership	Child owns the assets (irrevocable gift)
Control	Custodian manages until age of majority
Age of majority	18-25 depending on state and account type
Tax implications	Subject to kiddie tax
Financial aid	Counted as student asset (higher impact)

Kiddie Tax (2025)

When a minor's unearned income exceeds thresholds:

Unearned Income	Tax Treatment
First $1,300	Tax-free
Next $1,300	Child's tax rate
Above $2,600	Parent's marginal rate

Applies to: Children under 19, or under 24 if full-time students

UTMA vs. 529 for Education

Factor	UTMA/UGMA	529 Plan
Use of funds	Any purpose	Education only
Control at majority	Child takes control	Owner retains control
Financial aid impact	Higher (student asset)	Lower (parent asset)
Tax benefits	Limited	Tax-free growth for education
Flexibility	More flexible	Must be for education

Exam Tip: HSAs have TRIPLE tax benefits - the only account with all three. 529-to-Roth rollovers have a $35,000 lifetime limit and require the account be open 15 years. Kiddie tax kicks in at $2,600 of unearned income.

Series 66

10.3 Special Accounts (Education and Health)

Key Takeaways