Using Permanent Life Insurance as an Alternative Funding Vehicle.

Why would anyone use permanent life insurance (universal life or whole life) as a funding vehicle to pay for college education? There are several good reasons.

1. Life insurance is a "self-completing" plan. Let's assume dad is the breadwinner in the family. If he dies when a child is young without fully funding a 529 plan, there will be a significant shortfall when the child goes to college. But if dad owns life insurance, it would pay an income tax-free death benefit to the beneficiary (presumably the surviving spouse) who can use that money for the child's college education.

2. Cash value in a life policy will not only grow tax-deferred, but can be removed tax-free (within limits) for college expenses, through policy loans.

3. After borrowing from the policy, it will still have cash value that can grow for years to come. When the parent is in retirement, he or she can access that cash through withdrawals and policy loans. A 529 plan does not allow this.

4. Money in a permanent policy is not a countable asset when a child applies for college financial aid.

Saving for college can be painless as long as you have a plan. Contact Legacy Insurance Advisors and let an expert custom fit a college savings plan to meet your budget.