Thanks so much for the replies that I have received already. I am
definitely in the process right now of locating a financial planning
professional in my area (I have a number of leads from friends at
church). The information that I have gotten from these first three
replies has been very helpful. Of course I completely understand that
you need a LOT more information to assess my particular situation but
it is helpful to get some general info first before I sit down with a
financial planner.

Thanks again and I welcome any other comments.

Corey Burnett

Corey Burnett wrote:

- quote -

I would suggest you need to look at the terms of the company's offer
carefully. You note that it is a "long term" incentive--as such,
the issue of when your rights "vest" in what you receive becomes
important, as well as ownership of the policy or account.

There are also going to be income and payroll tax implications of
this structure that will need to be considered, but one key point to
consider is that, generally, to keep the *funding* of either one our
of your income the account will need to be available to the general
creditors of your employer *AND* the eventual income taxation would
be governed by the value when that restriction lapses--converting
what would otherwise be tax free build-up in either into taxable
income at that time. In either case, I'd probably prefer a
structure where income tax liability was triggered at the time of
*funding* so that I retain ownership.

But in that case there's another issue, even if you get immediate
ownership. The company may get you "long term" with the VUL by
agreeing to fund it each year--but there are some "gotchas" here.
First, remember the what that first letter stands for--variable
<grin> . So you have to look at what level of funding your employer
has committed to and who is managing the investments. If you manage
to blow the balance through bad investment choices, will the company
"make good" on the contributions or will you have to fund a shortfall?

Similarly, if they are agreeing to fund at the illustrated values,
what if the policy doesn't perform up to the illustration levels?
Again, will you need to "ante up" in order to get the policy back
above water, or is the employer going to make that up?

As well, what if your employment terminates? Will you now be
"stuck" with having to fund the policy or see it lapse (a likely
choice, especially in the early years)? What if your *employer*
terminates your employment? Does the reason your employment would be
terminated impact things? That is, if the economy slows down and
they decide they need to lay you off, do they also lose the
responsibility to fund the insurance? And could that make you a
more attractive layoff candidate in that case <grin> ?

Finally, you do need to look at the actual policy being
offered--does that policy "fit" you?

The 529 plan may make sense if you are sure you are going to need to
fund college (well, you have three children, so your odds are better
than average that at least one will end up in college <grin> )? It
also may be a better bet if you are concerned that you might either
be terminated down the line *OR* might find a greener pasture and
want to leave without an obligation to continue funding this
benefit. And, like the VUL, you have to look at the plan that will
be used.

The problem really is that without a *lot* more information about
the exact terms and condition of your offer, it's tough to offer
useful comments. And, frankly, you probably don't *want* to post
the details that would enable such comments <grin> . It could be
useful to pay someone(s) from the outside to look at the offers if
the numbers are at all significant--the problem is that this
analysis is going to involve a number of disciplines (legal, tax,
investment and insurance), so you might need a "team" (with the
related expense) to look at this.

--
Ed Zollars, CPA
Phoenix, Arizona

"Corey Burnett" <theburnetts[at]yahoo.com> wrote in message
news:73447641.0408260902.65300982[at]posting.google.com...
- quote -

If they are going to fund it, then I would favor the VUL for several
reasons, in no particular order:

1 - it provides you with a death benefit - just in case;
2 - it builds (or should build) some cash value that you could conceivably
borrow against when tuition time rolls around. In theory, you get to borrow
tax free with no repayment requirement, though it will reduce your death
benefit to your survivors;
3 - it is invisible when it comes time to apply for financial aid;
4 - if for some reason your kids decide not to attend college, you can get
to the money without having to pay a penalty for a nonqualifying
distribution;
5 - should the investments inside the VUL fall, you should be able to
exchange the VUL for a variable annuity. This would allow you keep your
basis (the amount you contributed) and upon surrender the loss could qualify
for better tax treatment than if you just surrendered the VUL;

The best thing you can do for you and your family is to make an appointment
with a financial advisor in your area who does planning work and discuss the
details of your overall situation.

Good luck,
Gene E. Utterback, EA

Corey, this is really a "no brainer"....

The first and foremost question is "do you NEED additional Life Insurance"?

Do NOT allow the alleged benefits of accumulation of funds that may or may not occur INSIDE of a Variable Life Policy, as compared
to the Tax Deferred accumulation of funds in the 529 plan for your kids.

If there is a demonstrable NEED for additional Life Insurance for the Family Benefit, as well as a Guarantee of college funding in
the event that you die before they get to college, then "A Life Insurance Plan" PAID FOR BY YOUR EMPLOYER is an excellent way to
provide it.

(this from a career Life Agent)
Cal Lester CLU



"Corey Burnett" <theburnetts[at]yahoo.com> wrote in message news:73447641.0408260902.65300982[at]posting.google.com...
- quote -

My employer is offering one of two different long term incentives to
keep me at the company for a while. Either a Variable Universal Life
Insurance policy that they would fully fund or contributions to a 529
savings plan for college. I am 39 years old with three small children
(ages 8, 6, 2). I've done a bit of research on both but would be very
interested in what people think the advantages and disadvantages are
of the two different options.

Thanks,
Corey