College Funding Using a Whole Life Policy?

[Embraerjetpilot]

I am new at the business and I am curious how I would find out information for doing such a thing as funding my children's college through a whole life policy? Is this a bad idea? How would I set it up?

Paul

 

[Brian Anderson]

Lots of background on this in this article:

Insurance Forums | Funding college without wrecking retirement: How one advisor helps clients pass this scariest of tests

If after reading it you want to contact Kerry Wallingford to learn more, her contact info is at end of the article.

 

[DHK]

To do true college funding using life insurance and annuities... requires knowledge of the FAFSA reporting requirements of assets & income.

The advantage of using life insurance and annuities, is that these assets are exempt from the FAFSA calculation as they are tax-deferred and do not generate a 1099, unless you create a taxable event.

 

[concunli]

NYL agents usually use Custom Whole Life as College Funding, but somehow their clients do not like this idea. It is too good to be true.

 

[Golfnut2112]

To do true college funding using life insurance and annuities... requires knowledge of the FAFSA reporting requirements of assets & income.

The advantage of using life insurance and annuities, is that these assets are exempt from the FAFSA calculation as they are tax-deferred and do not generate a 1099, unless you create a taxable event.

Annuities are a very bad idea for college funding and FAFSA reporting!! How do you expect to get the money out without generating a 1099? Thats also not taking into account taxes, penalties etc!! Life insurance is not much better with college cost at around $25,000 a year you will have to pay HUGE premiums in order to accumulate that kind of money, then there is the interest cost each year that needs to be paid once you start taking the money out. The bottom line is, if you can afford the premiums to fund a life insurance policy the correct way your income will probably be to high and the FAFSA will not get you a dime.

 

[Tahoe Ray]

Annuities are a very bad idea for college funding and FAFSA reporting!! How do you expect to get the money out without generating a 1099? Thats also not taking into account taxes, penalties etc!! Life insurance is not much better with college cost at around $25,000 a year you will have to pay HUGE premiums in order to accumulate that kind of money, then there is the interest cost each year that needs to be paid once you start taking the money out. The bottom line is, if you can afford the premiums to fund a life insurance policy the correct way your income will probably be to high and the FAFSA will not get you a dime.

You can write a lump sum ROP MEC with essentially no/little early growth to avoid this on the life side.

 

[pfg1]

I agree, annuities are not the ideal tool. There are alot of ways to utilize life products to help with college funding, but there's more to it than just putting one in place...and every client is different. The MEC that Ray mentioned is certainly one tool that can fit many situations.

 

[DHK]

Annuities are a very bad idea for college funding and FAFSA reporting!! How do you expect to get the money out without generating a 1099? Thats also not taking into account taxes, penalties etc!! Life insurance is not much better with college cost at around $25,000 a year you will have to pay HUGE premiums in order to accumulate that kind of money, then there is the interest cost each year that needs to be paid once you start taking the money out. The bottom line is, if you can afford the premiums to fund a life insurance policy the correct way your income will probably be to high and the FAFSA will not get you a dime.

You don't use the funds for college. You structure your financial assets to maximize financial aid awards. Life insurance and annuities are not reportable assets for the FAFSA.

 

[Golfnut2112]

You don't use the funds for college. You structure your financial assets to maximize financial aid awards. Life insurance and annuities are not reportable assets for the FAFSA.

If that is the case I would max out Roth IRA's first then look at non-qualified annuities or life insurance