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Some advisers recommend it to clients, but others want the idea banned.

Parents worried about how they will afford the soaring cost of college for their children are being steered by some financial advisers in a surprising direction: life insurance. Life insurance that carries a cash balance that can be pulled out and used to pay for higher education offers tax advantages over the popular Section 529 college savings plans, according to some advisers. It is also a better way to pay for college because the assets aren’t counted in the calculations used to determine financial aid eligibility, they contend.

Jeremy Turner, an adviser and president of Safe College Funding LLC, said that he steers about 10% to 15% of his middle-income clients in the direction of life insurance to plan for college costs. “It’s not a one-size-fits-all ap-proach,” he said. “It takes some crafting to make sure it’s the…

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One Response to

  1. Bình says:

    As a parent of a set of triplets, funding for college for the children is one of my top priorities.

    This is indeed a lifesaver given that one have to start early, so the life insurance policies have time to grow the cash value. Over the 20-year period, one could double the investment with the current 4% most insurance policies pay now-aday. The fees and costs associated with the policies is not really an issue if the investment is double, and guaranteed. However, if there are less than 10 years for the children to start paying for college, there will not be much return on investment. One still can go for the mix of 529 and whole-life insurance for later year, or grad/professional school.

    Another advantage over 529 is that one can change his/her mind if the children do not go to college or “mis-behave” One can use the insurance policy’s cash value for any purpose tax-free, penalty-free. With 259 or prepaid tuition, one pretty much stuck with the children. If they do not go to college, or not the college stated on the program, one would have to pay lots of tax and penalties to use the fund, or in some extreme case one do not have access to the fund at all.

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