IUL Vs. 529 - Opinions?

[Larry Tew]

I'm a proponent of permanent LI, but usually favor 529 plans. PL can fit in the right situation, but in practice it seems to be more of a niche solution for college funding.

Why do you usually favor 529's?

 

[VolAgent]

One thing to consider. If my financial situation changes, I can always stop funding the 529 and still have use of what I have contributed. If I stop funding the PI, odds are I won't have much cash value to use, and the policy might even lapse before college age.

 

[Larry Tew]

One thing to consider. If my financial situation changes, I can always stop funding the 529 and still have use of what I have contributed. If I stop funding the PI, odds are I won't have much cash value to use, and the policy might even lapse before college age.

Trying to make a case for either position in a vacuum is not how I would do it. The college funding conversation fits inside a broader conversation, and the client's ultimate decision on how to pay for college is made in light of all their other financial objectives. There are lists of "what ifs" that could make either position look right or wrong.

 

[VolAgent]

Trying to make a case for either position in a vacuum is not how I would do it. The college funding conversation fits inside a broader conversation, and the client's ultimate decision on how to pay for college is made in light of all their other financial objectives. There are lists of "what ifs" that could make either position look right or wrong.

Actually, I'm just playing devil's advocate for Greg.

I personally like to use a mix. Some 529 and some PI. Gives you more options and ultimately their are different animals.

 

[Norwayguy]

It's what VolAgent said. Here is a link that was accurate as of 2007: State Exemption Chart on Creditor-Debtor Issues

Some assume that annuities also enjoy the same preferred tratment as life insurance, but that's not necessarily true. For example, in NC annuities are not specifically mentioned in the NC General Statutes, so in absence of clear written exemption, you must assume they are not protected. Check your State's law. Florida, Texas, and Oklahoma are very liberal in their treatment.

Crap, wouldn't you know Maine would be all in Red....Intersting reading in the bottom about conflicting state statutes...If you have your IRA account held in a different state...With a 48 or 50 state life insurance company is your policy considered to be held in your state or the state the company is domiciled in?

 

[Larry Tew]

Crap, wouldn't you know Maine would be all in Red....Intersting reading in the bottom about conflicting state statutes...If you have your IRA account held in a different state...With a 48 or 50 state life insurance company is your policy considered to be held in your state or the state the company is domiciled in?

It's where YOU live.
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Actually, I'm just playing devil's advocate for Greg.

I personally like to use a mix. Some 529 and some PI. Gives you more options and ultimately their are different animals.

Yep. The main thing is to know how the options work, and help the client come to their own concluson.

 

[scagnt83]

I will present both and give a full description on the pros/cons of both.

After the presentation, most people go with the PI. (and yes, I usually use IULs for the PI for college funding)

Personally, I am a huge fan of IULs in general, especially for college funding.


529s and their features will vary from product to product and state to state. So its not exactly a cut and dry answer.

But the limitations of the 529 are their major downfall. I have a client right now who has a large amount in a 529 and his kid got a full ride to an ivy league school. Now he is trying to get as much out of their 529 tax free as he can (we wont go into details on that .... )
But ultimately he will be taking a pretty heavy hit on those funds that have built up. If he had gone with PI, he would not have to worry about that.


Also, on an overfunded UL/IUL the risk of it lapsing because of financial hardship is greatly reduced.
This is why I never use WL for college funding.
(yeah, I know that I will get berated for that comment, but I stand by it!!!!)

 

[Larry Tew]

Also, on an overfunded UL/IUL the risk of it lapsing because of financial hardship is greatly reduced.
This is why I never use WL for college funding.
(yeah, I know that I will get berated for that comment, but I stand by it!!!!)

Interesting. I never use UL or any variation of UL. I always use maximum funded (at the MEC limit) WL (with PUA rider) for college funding. You must know something I don't. I'm here to learn. Details please.

 

[arnguy]

Very informative thread with excellent contributions by forum members! Thank you.

 

[2112Greg]

Yes, yes indeed!

VolAgent asked about my securities licenses. I have Series 7 and 66 licenses, plus L&H.

Very informative thread, please keep the good stuff coming.