College Funding WL Vs. UL Vs. 529

[scottstreet]

I'm interested in the opinions of the securities licensed (or formerly licensed) WL experts on this subject That is, this is a shameless callout to brandon, larry , DHK etc,,,to further my education...thanks in advance.
. My initial take is that while the 529 would "on average" perform better as an accumulation tool I would be inclined to prefer a well designed blended par WL with PUA rider simply because the tool doesn't die at use the way the 529 would. That is the "miracle" of compounding continues to be used as life protection and retirement savings. moreover, the college money is needed at a specific date and with a 529 would be subject to the dangers of a sour market just when needed.

Thoughts?

 

[Norwayguy]

I'm interested in the opinions of the securities licensed (or formerly licensed) WL experts on this subject That is, this is a shameless callout to brandon, larry , DHK etc,,,to further my education...thanks in advance.
. My initial take is that while the 529 would "on average" perform better as an accumulation tool I would be inclined to prefer a well designed blended par WL with PUA rider simply because the tool doesn't die at use the way the 529 would. That is the "miracle" of compounding continues to be used as life protection and retirement savings. moreover, the college money is needed at a specific date and with a 529 would be subject to the dangers of a sour market just when needed.

Thoughts?

You already know the pluses and minuses of the 529 plans the vast majority of them using municipal securities ie mutual fund clones that have the "potential" for hirer returns than a WL or IUL might return and also having the potential for losses and just the time when most needed. You already know that the 529 is still an asset that is counted on the FAFSA form as an asset of the parent unless a grandparent was the owner of the 529 and that the Life policy CSV are not included in the FAFSA at this time.

The life policy is also self completing if the insured is the parent that would be funding the 529 or life policy and they die or in the case of waiver of premium or waiver of stipulated premium or what ever the specific company calls it can allow for the life policy to still grow if the insured becomes disabled.

And you know that 1 major thing that must be managed if the life policy uses loans to provide funds for college costs is to make sure the policy continues to stay in force.

There is no right or wrong answer I can make a compelling argument for the alternative of whatever you recommend to a client I think this is very client specific and can also depend on the dollar committment of the client.

 

[CHUMPS FROM OXFORD]

With $200,000 in college tuition facing us within the next five years, we chose the 529 route.

Mistake? Sometimes, I'm afraid to think about it.

 

[Full Throttle]

I personally am not a big fan of life insurance for college funding, however, I am a fan of kiddie life policies. The IRR in the policy is not very attractive. Here is what I do for my kid:

-Got a $100,000 permanent life policy with a GPO rider. I like the fact that it has guaranteed insurability built in for her. The premiums are cheap on a child. If God forbid something happens, I would want the money to replace my lost income. If her health declines, she has some guaranteed coverage in place. If she stays healthy and can get her own coverage later, I would do one of two things: 1. Either turn it over to her. Or. 2. Maybe use the proceeds to pay for her wedding, ect.

-For college savings, I set up an UTMA. I will spare you going into the reasons for that over a 529. That is where the college funding goes. There is more return potential, even if one conservatively allocates the funds. The cash on cash IRR on a her life contract is estimated to be something like 3% in 20 years (IUL policy at a 6.5% indexed return).

 

[SWM]

Depending on the state, I use either a 529 or UTMA in conjunction with a term contract. I am more inclined to use an UTMA over a 529 (agree with Full Throttle). Several reasons for this. I do not use a WL or IUL to fund college.

 

[Larry Tew]

The attached screen shot is the last screen of what I use to have the college financing conversation. Draw your own conclusion.

However... there is more to the conversation than just deciding where to park money for college. There's minimizing the Expected Family Contribution as well as assessing borrowing capacity. The last thing one wants to do is liquidate assets to pay for college.

 

[blue_wynd]

The attached screen shot is the last screen of what I use to have the college financing conversation. Draw your own conclusion.

However... there is more to the conversation than just deciding where to park money for college. There's minimizing the Expected Family Contribution as well as assessing borrowing capacity. The last thing one wants to do is liquidate assets to pay for college.

This is great. I am guessing "?" means depends on the circumstances? Know where I can find them? I know some of the situations, would be good if I know more. Finally, do you have a copy of the attachment for me to steal?

 

[scottstreet]

blue, protection from creditors is state specific. Please see the linked chart.
www.assetprotectionsociety.org/pdf_files/APS.50.State.Summary.pdf

 

[Larry Tew]

blue, protection from creditors is state specific. Please see the linked chart.
www.assetprotectionsociety.org/pdf_files/APS.50.State.Summary.pdf

That's a good chart along with others I have. I would suggest that an agent actually get the specific language from their state's Constitution and / or General Statutes. I have seen a few cases in these charts where they summarize but miss a fine point or two such as who owns the policy or who the beneficiary is.

 

[xwords59]

I have a related but different question. My S is applying to college now, and we have to submit FAFSA and CSS in a few weeks. For quite some time I have been trying to figure out how to deal with my fin situation so that I can minimize EFC. I have decided to invest in a WL policy because this is not a recognized asset for FAFSA/CSS, and this will save me 5.6% contribution expected on these assets every year.

I have received the WL contract from my broker, but I honestly cannot understand it. I have an MBA in finance, but the language on the policy seems like Greek to me and I cannot determine if the policy does what I expect it to do. Can anyone help me out with this?