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Two parts about using life insurance (and annuities) for college funding:
1) Having cash on-hand to pay for college expenses.
If you have a maximum funded policy, this is pretty good, but it also has to do with WHEN the child is going to attend. Quite truthfully, I don't set up kids policies like this UNLESS the parent is already "maxed out" on their coverage anyway.
Dollar for dollar, life insurance as a savings account takes about 8 years to "break even", so it's not ideal for single-purpose savings.
Having a policy on the PARENTS being maximum funded for multiple purposes is the ideal long-term strategy.
2) Maximizing college financial aid opportunities
When you study the FAFSA, you realize that it includes certain assets that generate a 1099 each year. So, if you have non-qualified assets (including home equity for private colleges), you can "hide" them by transferring the capital into life insurance and annuities. These products don't generate a 1099, unless you withdraw taxable interest. Then that becomes a taxable event. The timing on all this should be when the child is a junior in high school, or rather 2 years before filing the first FAFSA.
You can learn a lot about life insurance and annuities being used for college financial aid strategies from the Insurance Pro Shop: http://www.insuranceproshop.com/lifeinsurancemarketing/
1) Having cash on-hand to pay for college expenses.
If you have a maximum funded policy, this is pretty good, but it also has to do with WHEN the child is going to attend. Quite truthfully, I don't set up kids policies like this UNLESS the parent is already "maxed out" on their coverage anyway.
Dollar for dollar, life insurance as a savings account takes about 8 years to "break even", so it's not ideal for single-purpose savings.
Having a policy on the PARENTS being maximum funded for multiple purposes is the ideal long-term strategy.
2) Maximizing college financial aid opportunities
When you study the FAFSA, you realize that it includes certain assets that generate a 1099 each year. So, if you have non-qualified assets (including home equity for private colleges), you can "hide" them by transferring the capital into life insurance and annuities. These products don't generate a 1099, unless you withdraw taxable interest. Then that becomes a taxable event. The timing on all this should be when the child is a junior in high school, or rather 2 years before filing the first FAFSA.
You can learn a lot about life insurance and annuities being used for college financial aid strategies from the Insurance Pro Shop: http://www.insuranceproshop.com/lifeinsurancemarketing/
