One of the most unexpected uses for permanent life insurance is to help fund college tuition. Many don’t realize that College Savings Plans (a.k.a. 529 funds) actually count against applicants for financial aid, whereas permanent life insurance policies with cash value do NOT. This makes it particularly advantageous to use Indexed Universal Life as part of one’s overall retirement and college savings strategy.

This video from Midland National does a good job of outlining the main concepts. Make sure to work with a commissions-agnostic broker (such as your dedicated consultants at Quantum) if you want to use Life Insurance for college savings. As with anything, the devil is in the details and the better your policy design, the faster you’ll be able to grow those funds for college tuition as well as for other uses. Of particular note:  the lower your initial death benefit, the more your premiums will go towards cash accumulation as opposed to just cost of insurance. But make sure to avoid creating a Modified Endowment Contract (MEC), or you’ll lose the tax-advantaged status of your cash growth!

All this may sound complex, but it’s actually quite simple to fold your college savings planning into any other permanent life insurance you may need, so long as you are working with an advisor who understands your goals and can calibrate your cash value life insurance design to achieve those goals. You can also set up a College Savings IUL for a child, as a way to gift them with a nest egg that will grow over time. Speak with your consultant so you can learn more about this strategy and see if it’s right for your family. In the meantime, Midland’s video on using IUL for College Savings will help you better understand the foundational principles.

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Using IUL for College Savings