BeamaLife Blog

A recent article in The Wall Street Journal advised readers to “beware rule changes on Coverdells.”  Coverdells Education Savings Account, in case you’re not familiar with them, are investments that offer tax-free growth and withdrawals, as long as the money is use for qualified educational expenses.  They were once known as education IRAs, and sometimes they’re still referred to that way, although the money that goes into them is not deductible from taxable income. 

If you’re a parent who already owns a Coverdell, the article continued, you should be aware that there is good news – you can invest as much as $4,000 until April 15^th, since the money deposited before April 15^th counts towards the previous year’s (2009) limit.  And, there’s bad news.   Unless Congress extends the current benefit, starting next year withdrawals that are used to pay for expenses from kindergarten to 12^th grade will no longer be tax free.

That doesn’t mean that Coverdells are bad investments, of course.  They’re still a good way to save for and finance education in the United States.  Even with their limitations, such as the fact that beneficiaries must be under age 18 when the money is contributed, and that the money can’t be refunded to the person who started the account, they’re still better than doing nothing.

But there is one savings vehicle allows you to tax-free growth and withdrawals without those limitations.  Imagine being able to contribute what you wanted, when you wanted, without any limits.  Imagine being able to use the funds for any level of education, for any member of your family – even yourself!  Imagine the funds not all being needed, and the overage being returned to you, the person who created and funded the account.   Imagine even being able to pass the funds along to your heirs in the event of your death. 

By now you’ve probably figured out what savings vehicle I’m talking about.  It’s whole life insurance, of course.  And not only can it help you to save towards and fund your children’s educations.  You can use the money for any other purpose you choose as well.  Many types of life insurance policies have loan provisions that allow you not only have tax-free growth of your capital, but also to borrow tax free against the balance of your account.  For education, or for whatever other purpose you choose.

Life insurance is the only savings vehicle that I know of with so many uses – including the most important: making sure that in the event of your death, your family’s financial needs are completely taken care of.