Question

In 2020, Amanda set up Coverdell education savings accounts for each of her four grandchildren, aged 7, 9, 14, and 16. She would like to contribute the annual maximum to each savings account when she usually makes other annual-election gifts every year on December 31. The annual maximum for 2020 is $2,000. How much can she contribute in total to the Coverdell education savings accounts in 2020 and each of the next four years

Answer 1

The answer is "$32,000"

Step-by-step explanation:

Coverdell mutual funds must be paid until the beneficiaries are 18 years old. The 16-year-old would be only eligible for two-year contributions (aged 16 and 17). The 14- year old is eligible for the four years' payment (age 14, 15, 16, 17). In five years, it would therefore be a total of $32,000 in the following:

`7\ year-old (5 * \$2,000) = \$10,000\\\\9\ year-old (5 * \$2,000) = \$10,000\\\\14\ year-old (4 * \$2,000) = \$ 8,000\\\\16\ year-old (2 * \$2,000) = \$ 4,000`

Total
`= \$10,000+\$10,000+ \$8,000+\$4,000=\$32,000`