Q. Would an IUL make sense for a parent who wants to sock away $20K for a teenager's college fund?
A. If the child is already a teenager, the cost of insurance will outweigh the tax advantage brought by IUL, making this idea not a good one. 529 plan is probably the best option at this stage.
If the parent intends to create a nest egg for the child, plus some life insurance coverage, then this is a good idea, since the timeframe is very long.
Also, if the child is really young with at least 15 years saving time, it might be a viable option, because IUL assets are not counted in financial aid calculation. Here is a table that summarizes the differences of 529 plan and permanent life as college fund option well.
A. If the child is already a teenager, the cost of insurance will outweigh the tax advantage brought by IUL, making this idea not a good one. 529 plan is probably the best option at this stage.
If the parent intends to create a nest egg for the child, plus some life insurance coverage, then this is a good idea, since the timeframe is very long.
Also, if the child is really young with at least 15 years saving time, it might be a viable option, because IUL assets are not counted in financial aid calculation. Here is a table that summarizes the differences of 529 plan and permanent life as college fund option well.
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