College Planning

What is a 529 plan? 

A 529 College Savings plan allows you to save for college with a variety of investment options to grow tax free for qualified educational expenses.  In the past, 529 plans were only used for college but there have been some major updates over the last few years:

Recent changes to 529 College Savings Plans provide more flexibility and benefits for families saving for education. Here are some key updates:

• Use for K-12 Tuition: Funds can now be used for up to $10,000 per year in K-12 tuition, expanding the plan’s coverage beyond higher education.
• Student Loan Repayment: Starting in 2024, 529 funds can be used for up to $10,000 in student loan payments for the beneficiary, with an additional $10,000 for siblings.
• Easier Beneficiary Transfers: Families can now change the beneficiary of a 529 plan more easily, allowing funds to be redirected to other children or even future graduate education.
• Expanded Qualified Expenses: 529 plans can now cover expenses for apprenticeships, broadening the scope of eligible educational costs.
  State Tax Incentives: Many states offer tax deductions for contributions, making 529 plans more attractive.
• Rollover to Roth IRAs: Some states now allow 529 funds to be rolled over into a Roth IRA, offering long-term growth opportunities for unused savings.

These enhancements make 529 plans a more versatile tool for funding education and managing long-term savings.

Investors should consider the investment objectives, risks, charges and expenses associated with municipal fund securities before investing. This information is found in the issuer's official statement and should be read carefully before investing.

Investors should also consider whether the investor’s or beneficiary’s home state offers any state tax or other benefits available only from that state’s 529 Plan. Any state-based benefit should be one of many appropriately weighted factors in making an investment decision. The investor should consult their financial or tax advisor before investment in any state's 529 Plan.

Using Life Insurance Cash Value to Fund Education and helping with Financial Aid Applications
Life insurance policies with a cash value component, such as whole life or universal life insurance, can be a useful tool for funding education expenses. The cash value grows over time and can be accessed through loans or withdrawals to help pay for tuition, fees, or other educational costs. Here’s how it works:

• Accessing Cash Value: Policyholders can borrow against or withdraw from the cash value of their life insurance policy. Loans typically have low interest rates and don’t require immediate repayment, although unpaid loans may reduce the death benefit.
• Impact on Financial Aid: Life insurance cash value is often not counted as a student asset on the Free Application for Federal Student Aid (FAFSA), which may result in a more favorable financial aid package. However, loans taken from the cash value could be considered a liability, potentially affecting aid eligibility.
• Flexibility: Using life insurance cash value offers flexibility in how funds are accessed, without the need for a credit check or traditional loans. It can also serve as a backup funding source if other financial resources are exhausted.
• By setting up Life Insurance on a child, the cost of insurance is typically very low; allowing for more of your premiums to be directed to the cash value over time.
• If the child changes course, the cash value can be used for any purpose such as: Buying a car, Purchasing a first home or investment property, becoming the core holding to an insurance portfolio, drawing an income in retirement and other financial endeavors

While utilizing cash value can help with education costs, it’s important to weigh the potential impact on long-term financial security and the policy’s death benefit.

The cost and availability of life insurance depend on factors such as age, health, and the type and amount of insurance purchased. Before implementing a strategy involving life insurance, it would be prudent to make sure that you are insurable by having the policy approved. As with most financial decisions, there are expenses associated with the purchase of life insurance. Policies commonly have mortality and expense charges. In addition, if a policy is surrendered prematurely, there may be surrender charges and income tax implications.

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