College Funding & Life Insurance

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With the current bull market roaring ahead, it’s vitally important to protect yourself from loss while your assets continue to grow. Seems intuitive, but difficult to implement without the proper financial tool.

According to the Allianz Life Insurance Company of North America, more than half of the respondents to their 2018 Life Insurance Needs Survey (Needs Survey) were unsure or didn’t believe that cash value from permanent life insurance can be used to assist with other financial needs.

That’s likely the biggest secret out there! Very few people are aware of the benefits to be had from a properly designed permanent life policy.

In fact, college funding can be one of those benefits.

It’s both amusing and quite sad that almost 70% of the respondents to the Needs Survey stated the belief that the ability to use funds to pay for college is a valuable feature to consider when purchasing a financial product.

Yet, those people and more “turn their noses up” at the very mention of life insurance, even when they know they are underinsured.

So, let’s answer some questions you may have (or, perhaps, never even considered)…

1. How can cash value (CV) life insurance be used to help fund college expenses?

While the main purpose of life insurance is to provide a death benefit (DB) to loved ones, the DB under a permanent life insurance policy properly designed to build the greatest cash balance possible is the minimum required by the IRS to ensure everything remains non-taxable.

Growth of the cash value is the primary benefit, the DB merely is an added benefit. The cash value can be accessed for any reason, such as college funding.

2. What are the benefits to using loans from CV life insurance for college funding?

Loans from CV are tax-free. Moreover, they are not considered income and, therefore, typically will not affect a family’s eligibility for financial aid.

3. I have 529 Plans. Why would I need CV life insurance?

The foremost advantage to using CV life insurance is that the government and the schools don’t see it as an available asset. It is not considered when calculating eligibility for financial aid.

529 Plan assets do count as an available asset and will affect eligibility for financial aid.

4. What if my child does not attend college?

Funds from a 529 plan must be used for qualified education expenses. Otherwise, if utilized for other expenses, the earnings portion will be considered part of the beneficiary’s income and will be subject to a 10% penalty.

Conversely, the CV life insurance can be used for any financial need, including debt elimination.

5. Can grandparents help?

Absolutely! There are many advantages to using CV life insurance to help fund a college education – no complex eligibility requirements, no qualified education costs, and no income limits. Furthermore, money received from a policy loan generally won’t impact eligibility for financial aid.

Now, bear in mind, life insurance does require health and financial underwriting. However, that’s a small price to pay for a financial vehicle that:

• Will be an important part of any properly designed and implemented college funding campaign;

• Can be used to eliminate all household debt much quicker than ever imagined; and,

• Can improve the retirement horizon for parents of college-bound children.

Contact us to learn how a properly designed cash value building, permanent life insurance policy can be the bulwark of your college planning campaign, while being used to eliminate household debt and improve one’s potential retirement scenario.

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