Learn how Permanent Life Insurance can secure your child’s education while building lasting wealth.
When it comes to your kids college education funding, Planning Ahead is Key. A long term plan considering various funding options are extremely important. Most young parents have the following options in hand, when it comes to college funding.
529 College Savings Plan
Coverdell Education Savings Account
UGMA Custodial Account
Financial Aid
Permanent Life Insurance
Given below are the Features, Pros and Cons of each of these options:
529 College Savings Plans
The primary features of 529 College Savings Plan is listed below:
After-tax contributions
Grows Tax-Free
No Income restrictions; may be gifting implications
Parent is typically the account holder
May reduce eligibility for Parent Loans
No tax distribiution if total distributions for the year are less than the amount of adjusted qualified education expenses.
Tax cuts and Job Act of 2017 now allows 529 Plans to be used for primary and secondary educational institutions.
Permanent Life Insurance as a College Funding Strategy
The primary features of Permanent Life Insurance, w.r.t. College Funding is listed below:
Primary purpose is to pay Death Benefit to Beneficiaries
Can accumulate Cash Value
Grows Tax-Deferred
If structured correctly, withdrawals can be withdrawn tax-free
No specific limits on contributions. If you over fund, you run the riskj of the policy becoming a Modified Endowment Contract.
Does not affect eligibility for Financial Aid
No restrictions on purpose of use.
Pros
Cons
Self-Completing: At premature death of Insured, death benefit provides funds for the beneficiary
Flexibility and Protection: Can be used foir any purpose and can provide protection against market downturns.
Long Term: Needs sufficient time to accumulate cash value
Complex: Can be complex and expensive
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