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👥 Customer Accounts · Lesson 8 of 8 · 6 min

Education Savings and Special Situations

🎓 A parent wants to save for school, a customer wants to move firms, a widow calls about her husband's account, and an 82-year-old wants to wire his savings to a stranger. One lesson, four situations.

💡 Key idea

Coverdell: $2,000 per beneficiary per year. ACATS: 1 day to validate, 3 to complete. 2165 holds protect specified adults (65+, or 18+ with an impairment). 3210: employer's prior written consent.

🧠 Why it matters

COVERDELL ESA: $2,000 per beneficiary per year in total, contributions while the beneficiary is under 18, funds used by age 30 (special-needs exceptions). 529 plans: much higher limits, set by each plan. In both, growth is tax-free if used for qualified education. ACATS (FINRA 11870): the RECEIVING firm starts the transfer; the carrying firm validates within 1 business day and completes it within 3 business days after. DECEASED customer: freeze the account, cancel open orders, wait for documents. FINRA 2165: for a SPECIFIED ADULT (65+, or 18+ with an impairment) and suspected exploitation, the firm MAY hold disbursements or transactions, 15 business days at first, extendable. FINRA 3210: a rep needs the employer firm's prior written consent to open an account at another firm.

📈 In the real world

🛑 Walter, a fictional 82-year-old, asks to wire $90,000 to an online 'friend' he has never met. His rep suspects a romance scam. The firm places a temporary hold under FINRA 2165, notifies his trusted contact within two business days, and starts an internal review.

📌 Takeaways

  • Coverdell $2,000/beneficiary/year; under 18 to contribute, use by 30
  • ACATS: receiving firm initiates; 1 business day to validate, 3 to complete
  • 2165 hold: specified adult 65+, initial 15 business days; 3210: employer's prior written consent

📖 Terms in this lesson

Coverdell ESA: An education savings account limited to $2,000 of contributions per beneficiary per year, with tax-free qualified withdrawals.

ACATS: The Automated Customer Account Transfer Service that moves customer accounts between firms.

Temporary hold (Rule 2165): A firm may briefly hold a disbursement from a specified adult's account when it reasonably believes financial exploitation is occurring.

✅ Test yourself

What is the maximum total Coverdell ESA contribution for one beneficiary per year?
  1. $7,500
  2. $10,000
  3. $5,000
  4. $2,000

Answer: D · $2,000

Coverdell contributions are capped at $2,000 per beneficiary per year, no matter how many accounts or contributors. $7,500 is the 2026 IRA limit, and 529 plans have far higher limits.

Under FINRA 2165, which customer is a specified adult?
  1. Any customer with a margin account
  2. A 40-year-old institutional trader
  3. A 66-year-old investor
  4. A 17-year-old UTMA beneficiary

Answer: C · A 66-year-old investor

A specified adult is a natural person 65 or older, or 18 or older whom the firm reasonably believes has an impairment that keeps them from protecting their own interests. Age, not account type, is the test.

Under ACATS, which firm starts a customer's account transfer?
  1. The clearing agency
  2. The customer's bank
  3. The carrying firm
  4. The receiving firm

Answer: D · The receiving firm

The customer signs a transfer form with the receiving (new) firm, which submits it through ACATS. The carrying (old) firm then validates within one business day.

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