with indexing universal life insurance
Is this a MUCH better solution than a 529 College Savings Plan?
7 INCREDIBLY good reasons to fund or over fund an indexing universal life insurance policy (IUL) and build cash tax free.
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- Cash built up in a IUL can be used ANY WAY the policy holder wishes. Pay for college, purchase a house, take a trip, all tax free using participating policy loans. If you do not use the 529 college plan for qualified college expenses, you will pay a 10% penalty and be subject to income taxes. Also 529 plans are subject to tax and penalty if distributions are for colleges outside of the United States. You are limited as to how much you may contribute to a 529 plan, while IUL contributions are virtually unlimited, since they are limited only by the amount of life insurance you can qualify for. Rules and restrictions with a 529 plan may keep you from paying other needed expenses (health care, bills, emergencies).
- Very safe and conservative growth since the money grows by indexing the markets. Your account balance can only go up and you will NEVER get a negative return with a properly structured policy. The cash value inside the IUL is also TAX FREE. Most 529 plan investments may suffer losses.
- A hybrid indexing universal life policy also protects the policy holder starting day one from a CRITICAL ILLNESS (cancer, heart attack, stroke) CHRONIC ILLNESS (long term care expenses) or TERMINAL ILLNESS (two years of life or less). There is no extra charge for this benefit!
- Should a Sudden death occur, the heirs will receive much more than whatever was put into the IUL policy, all tax free.
- No government control or penalties with an IUL policy. You can take the money tax free at any time.
- Any distributions from a 529 plan that is owned by a third-party are counted as untaxed income, and they may hurt your child’s chances of qualifying for financial aid, including grants, work-study programs, and subsidized loans. However, life insurance is not included in financial aid analysis, while assets in a 529 plan may be.
- The IUL can be put on the child, parent or even grandparent allowing the person funding the plan to have control.
A solution from an unexpected source
Using your personal savings or 529 college savings plan should be the primary source for college funding. However, there is one “flaw” with personal savings or a 529 plan. If the family’s primary breadwinner passes unexpectedly, personal savings plans, or a 529 plan generally abruptly end. A life insurance policy can help ensure the full funding amount is immediately available to pay for college. But you do not have to die for this plan to work.
5 Mistakes to Avoid when using Life Insurance in College Funding
- Starting too late
- Not using accumulation-focused cash value life insurance
- Making withdrawals from the policy instead of taking loans
- Not structuring and funding the policy properly
- Incorrectly naming the owner, insured, or beneficiary
Many parents hope and plan for their children’s future education. But what if an unexpected death or illness prevents you from working and saving for those expenses? Life insurance can provide a way to help fulfill your wishes and financial goals to fund an education, by providing death benefit protection in your absence or through loans and withdrawals if the policy remains in-force.
Why would anyone want to even consider a 529 college savings plan when they can get so MUCH more benefits with a properly structured IUL policy that includes hybrid life benefits as well as living benefits?
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