<p>As a strategy to offset seeing money in custodial accounts, my husband was told to buy a life insurance policy against himself, so our two children would qualify for more aid. Does anyone know if this is a legitamate means?</p>
<p>I'm guessing the person providing the advice to buy a life insurance policy might also be selling a life insurance policy.</p>
<p>whole life insurance is the single worst way to spend your money.</p>
<p>If you really want life insurance, buy a term policy</p>
<p>IF you find a sudden need to reduce your financial aid liability, putting the money into an annuity, or buying a single premium whole life policy can be an effective way of quickly tying up the extra funds. HOWEVER over the long term, these may not be the best way for you to invest your money, AND if you need access to that money for other purposes before you die (life insurance) or retire (annuity) it will be a relatively messy proposition to get access to it. Not to mention that these do not always have the best returns on investment.</p>
<p>If you are concerned about how much money the colleges are likely to expect your family to be able to pay, you should run some of the FAFSA and PROFILE calculators that are available on the web. The one at FinAid</a>! Financial Aid, College Scholarships and Student Loans used to be pretty good.</p>
<p>Have you and your husband absolutely maxed out your 401(k) or other pension options? Do you absolutely max out your IRAs every year? These might be better choices.</p>
<p>For easy, and relatively fun reading on these topics, I suggest picking up a copy of "Personal Finance for Dummies" at your local library or used book store. I think my copy cost $4.50.</p>
<p>Good luck!</p>
<p>Also, there is no sense rearranging assets to make them unavailable for finaid unless your income is low enough to allow you to qualify for aid.</p>
<p>It is true that cash value in a life insurance plan is not available for financial aid, but it also would not be available to you for many many years. You could not put $50k into a life insurance policy to hide it from the finaid dept. and then take it out 4 years later. Those policies have a surrender charge and it may take 10-20 years before you can escape that.</p>
<p>That is one reason why the funds are not counted, they are truly not available.</p>
<p>Thank you all for your thoughtful comments. Yes, the person is selling life insurance. I am very concerned that my husband is stubbornly considering doing this against family advice to look into it more thoroughly. Your posts are obviously based on experience and I am so grateful.</p>