Education Planning Services

Education Planning Services by Legacy Partners

Traditional Education

College Savings Plan – 529 Savings Plans

Saving for your children’s education is a selfless act. We know you love your children, and we know you want to support their dreams and interests. Your spending habits will determine how much contributions you can put away for your kids.

What is a 529 Plan?

A 529 Plans is designed for college saving and is generally operated by states or educational institutions.  These plans can be opened at any time and kept until needed. You can open a 529 Plan in any state, depending on the requirements. 529 savings plans are subject to market risk and volatility. Accounts may lose or gain value. Diversification does not assure a profit or protect against loss.

Many 529 Plans have a minimum contribution limit such as $50. By starting small and scheduling for monthly, automatic contributions you can start to build your future student’s college savings into your budget.

As your infant grows to a toddler and then goes on to elementary school, daycare costs decrease, and you can consider adding your newly found “raise” to your child’s college savings.You can also set aside some of your annual bonuses or other unexpected income sources such as a tax return toward your 529 to boost investment.

If you start a 529 Plan with $1,000 and contribute $100/month over 18 years, your contributions would add up to $22,600, assuming no growth rate of return.

When students apply for financial aid, a portion of the funds in a 529 Plan is often considered before a financial award is determined–but life insurance is not.

Money in a 529 plan grows federal and state tax free. In addition, you can withdraw the money without having to pay federal and—depending on the plan and where you live—state income taxes, as long as it’s used to pay for qualified higher education expenses. If the money is used for other purposes, the earnings portion of a withdrawal is subject to ordinary federal income tax, an additional 10% federal tax and any applicable state income taxes.

529 Plans come in 2 forms: college savings plans & prepaid tuition plans.

  1. College savings plans allow you to invest your money in an account to pay for the beneficiary’s (student’s) higher education expenses. Students can use the funds for qualified expenses at accredited institutions in the U.S. and abroad. Conditions, such as contribution limits, vary by plan.
  2. Prepaid tuition plans allow you to “lock in” tuition rates at eligible colleges or universities with a lump-sum investment or monthly installment payments. In other words, since you are paying in advance, you are avoiding potential tuition inflation down the road.

Non-Traditional Education Plans

Non-Traditional Way to Plan for College

Helping your children or grandchildren with college expenses can be one of the greatest gifts you’ll ever give.

College costs are on the rise, and today more than ever, Students are graduating with significant debt or abandoning higher learning all together due to high tuition.  Therefore, by choosing a college planning strategy today, you can make an investment in your children that will last them a lifetime.

For example, if you or your child own a whole life policy, it may provide some added benefits beyond life insurance. Parents and children (over age 18) may still be able to take a loan from their whole life policy for education.

Legacy 10 Payment Plan

A family could invest tens of thousands of dollars into a policy’s cash value without it hurting a student’s financial-aid prospects.

Pay $200 a Month for 10 years ONLY

Gender Child’s Age Total Paid in 10 Years Cash Value Accumulation After 10 Years Cash Value Accumulation After 30 Years Cash Value Accumulation After 50 Years Life Insurance Benefits After 10 Years Life Insurance Benefits After 30 Years Life Insurance Benefits After 50 Years
Male 3 $24,000 $22,962 $74,382 $245,594 $228,297 $378,305 $637,592
Female 3 $24,000 $22,464 $75,383 $252,854 $264,313 $435,063 $737,744

Another advantage of using cash value whole life insurance to save for college is a provision known as “uninterrupted compounding”. This allows money in a cash-value policy to continue to grow even if the policyholder takes out a loan against it. For example: if you have a policy with a $70,000 cash value, and you take out a $40,000 loan against it, your policy will continue to earn interest based on that $70,000. This is the only product on the planet that has that feature.Withdrawals are typically taken as loans, but if a policyholder dies before the loan is repaid, the beneficiaries will receive the difference between the intended death benefit and the outstanding loan.

Life-insurance policies aren’t counted as an asset in financial-aid formulas and don’t affect the aid students receive, though 529 assets are factored into aid decisions.

Unlike a 529, which can only be used to pay college-related costs, the cash value of life insurance may be used for any purpose.So if a child decides not to attend college or if an emergency arises, the account may be used without penalty.

Distributions under the policy (including cash dividends and partial/full surrenders) are not subject to taxation up to the amount paid into the policy (cost basis). If the policy is a Modified Endowment Contract, policy loans and/or distributions are taxable to the extent of gain and are subject to a 10% tax penalty.Access to cash values through borrowing or partial surrenders will reduce the policy’s cash value and death benefit, increase the chance the policy will lapse, and may result in a tax liability if the policy terminates before the death of the insured.

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