Paying for a child’s college education has always been expensive, but rising costs mean that tuition today costs more than any other time in history. You don’t have to take chances with your child’s future. Read more to learn how you could leverage your estate plan to pay for a loved one’s education, or contact Beacon Legacy Law today to schedule a Vision Meeting with us to discuss. Schedule a Vision Meeting Table of Contents 3 Critical Education Planning Strategies 1. Education Planning via 529 Plans 2. Using Life Insurance Policies for Education Expenses 3. Testamentary Trusts for Education Planning Building a Stronger Estate Plan to Protect Your Family’s Future Do You Need to Speak to an Estate Planning Lawyer 3 Critical Education Planning Strategies Everyone takes a different approach to saving for their child or grandchild’s college education, from saving a percentage of each paycheck to investing in accounts and policies that pay long-term dividends. Let’s look at three time-tested strategies Florida estate planning lawyers often recommend to clients in appropriate circumstances. 1. Education Planning via 529 Plans A 529 plan is a tax-deferred savings plan that can be used to pay for college expenses. Every state has its own rules for 529 plans. In Florida, families can typically choose between the following two options: Prepaid 529 plans. A prepaid 529 plan can be used to cover predetermined college expenses. Most prepaid plans are established while the student is still a child. The plan’s owner makes regular payments, with benefits available when the beneficiary begins attending an eligible higher education program. Savings 529 plans. Savings plans are more flexible than prepaid plans. The plan’s owner decides how much money they want to save, and they make payments at their own pace. Earnings can be used to cover any eligible higher education expenses. These plans offer more flexibility but are often subject to more market volatility. In Florida, earnings on a 529 plan are not subject to state or federal tax as long as they are used for certain education-related expenses. 2. Using Life Insurance Policies for Education Expenses Life insurance policies can be used to create either a safety net for beneficiaries or an easily accessible financial reserve. However, not every type of life insurance offers enough flexibility to help families pay the costs of a college education. Permanent life insurance policies, for instance, put your money toward two different kinds of benefits: a standard death benefit and a separate cash-value account. Permanent life insurance is usually sold in the following forms: Whole life insurance. If you purchase a whole life insurance policy, your insurer will credit your account with a guaranteed cash-value amount. If left untouched, this cash-value amount grows tax-deferred. Variable life insurance. Variable life insurance gives policyholders a greater measure of control over their investments. You may be able to select the investment sub-accounts attached to your policy, which will likely determine its performance—and, by extension, your returns. If your child goes to college, you can typically take out a loan against the cash-value portion of your account. In most cases, if the loan is not repaid, your insurer will take the difference from your death benefit. This may seem like a downside but it could work to your advantage if you had always intended for your life insurance policy to serve as a college fund. 3. Testamentary Trusts for Education Planning A testamentary trust is a trust that is created by a last will and testament. Unlike living trusts, testamentary trusts only take effect after the grantor has passed away. Most assets assigned to the trust will still be subject to probate, but the relative flexibility of these estate planning instruments ensures that parents and grandparents can place stringent conditions on how the trust’s funds can be used—for college, housing, or almost any other expense. Building a Stronger Estate Plan to Protect Your Family’s Future Your estate plan is stronger when it’s configured to protect your child’s education, your family’s financial future, and your personal well-being. Aside from explaining the benefits of using tools like 529 plans, life insurance policies, and testamentary trusts, a Florida estate planning lawyer could help you by: Identifying and implementing strategies that save you money on taxes while you’re still alive, potentially driving down your family’s liability for federal wealth and estate taxes. Reviewing and revising your beneficiary designations can leave your loved ones an inheritance that isn’t subject to all the risks that probate so often entails. Talking through the possible short- and long-term benefits of establishing a living trust, another type of estate planning tool that can protect your assets and provide a powerful, structured inheritance. Do You Need to Speak to an Estate Planning Lawyer in Palm City or Stuart? If you need help creating an estate plan to secure your future, contact us online by clicking the button below to schedule an appointment. For immediate assistance, call (772) 266-5108 now. Schedule a Vision Meeting We’re proud to serve residents of Stuart, Palm City, Jensen Beach, Jupiter, Jupiter Island, Tequesta, Hobe Sound, and Port St. Lucie.
