A surprising option for education funding
You’ve probably heard of a 529 plan when it comes to saving for your child’s education. It’s recognizable as an education savings vehicle because of its favorable tax treatment for qualified education expenses, and depending on where you live, a possible state tax deduction.1 But it’s not the only option available to you.
An indexed whole life insurance policy can help you accomplish your education savings goals while providing some additional benefits you might not have considered:
Sometimes there are better solutions1
There may be situations where indexed whole life insurance won’t work for you. It’s best to use life insurance as a college savings option when the child you hope to help send to college is young. That way your policy can build enough cash value to properly cover college expenses. But if that first tuition bill is coming up soon, life insurance may not be the solution for you.
What role will life insurance play in your plan?
Providing protection to loved ones is one of the primary objectives of indexed whole life insurance; however, it can play a key role in your college funding plan with tax-preferred access to cash values and additional benefits that provide added flexibility, protection and guarantees. It can also be a solution that supplements funds alongside your 529 plan contributions. It doesn’t have to be one or the other when it could be both.
Talk with your financial professional to see if using indexed whole life insurance is a college savings solution for you.
1 Ohio National and its affiliates do not provide tax or financial planning advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for tax or financial planning advice. you should consult your own tax or financial planning advisor before engaging in any insurance transaction.
2 Distributions taken via policy loan may be used for any purpose and are not taxed under current law provided the policy avoids Modified Endowment Contract (MEC) status and remains in force.
3The deduction of any applicable policy fees may result in a loss of account value when market performance is poor.
If tax-free loans are taken and the policy lapses, a taxable event may occur. Loans and withdrawals from life insurance policies classified as modified endowment contracts may be subject to tax at the time the loan or withdrawal is taken and, if taken prior to age 59½, a 10% federal tax penalty may apply. Withdrawals and loans reduce the death benefit and cash surrender value. Withdrawals from 529 plans are tax-free if used for qualifying education expenses.
FAFSA is a registered trademark of the U.S. Department of Education.
Indexed whole life insurance is issued by Ohio National Life Assurance Corporation. Indexed Whole Life Insurance is issued on policy form ICC22IWL-1 and any state variations. Optional Waiver of Premium Rider is issued on rider form 22-IWWP-1 and any state variations. Policy, policy features and rider availability vary by state. Guarantees are based on the claims-paying ability of the issuer. Dividends are not guaranteed. Products, product features, and rider availability vary by state. Product not available in CA. Issuer not licensed to conduct business in NY.
Clients should consult their own tax advisors regarding the comparative tax benefits of 529 plans, as well as the potential taxation of distributions from both 529 plans and whole life insurance policies.
THIS MATERIAL IS FOR USE WITH THE GENERAL PUBLIC AND IS NOT INTENDED TO PROVIDE INVESTMENT, INSURANCE OR TAX ADVICE FOR ANY INDIVIDUAL.