Using Life Insurance to Fund Childs College

[ccma]

Hello,

Has anyone used Life Insurance as a strategy to fund Child's College education? I was on an Insurers back office training and they showed a strategy of using Life Insurance to fund child's education. My follow up questions would be:
1. What in your mind would be the best product to do this?
2. What strategy would you use?

Thank you for any feed back.

 

[jboussea]

Im no expert but I'm sure a Blended whole life or an IUL would be your best bet..you'd have to overfund the policy of course .. how old is the insured?

 

[ccma]

The children's ages are 13, 8 and 4

 

[DHK]

Insuring the children is not how you do college funding using life insurance.

First, before you could even consider putting insurance on children, you must have sufficient life insurance on their parents.

Second, there are two strategies of college planning.
1) Having money available to pay for college.
2) Having money that is not counted on the FAFSA to maximize the potential financial aid award. This generally includes all retirement accounts and any other account that does not generate a 1099 for any interest earnings or gains. This includes life insurance and annuities. Home equity is usually an included asset with private colleges and universities, but not state-funded colleges.

You need to sell life insurance on the parents and maximum-fund that policy for the purposes of college-funding.

The reason to use life insurance, is so that you can CHOOSE if and when to access that asset. In addition, the loan proceeds or withdrawals are not counted against them for the sequential years the parents file the FAFSA. You can't do that with a 529 or a Qualified Plan.

Now, I won't tell you not to buy juvenile policies on children (as it does help protect their insurability), but I would do that AFTER a maximum-funded policy on the parents.


If you want more training on doing this with more people, I'd recommend getting some training from the Insurance Pro Shop.

http://www.insuranceproshop.com/

 

[ccma]

Global Atlantic shows the strategy of insuring the children, pulling money out for college then letting the cash value grow for the child. DHK, what are your thoughts?

 

[DHK]

My thought... is that's a way to make little sales with no underwriting requirements (might barely be worth your time), instead of setting up a comprehensive wealth and economic strategy using permanent life insurance as the foundation for a family's long-term success.

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