Blog · Family

How Will You Save for a Child or Grandchild’s Uncertain Future?

Tom Southard ·

College may or may not happen. Career paths are less linear. Taxes are likely higher. And flexibility matters more than ever.

Three vehicles are now commonly discussed for children and grandchildren:

  • The 529 education savings plan

  • The newly proposed Universal Savings Account (USA, or Trump Account)

  • A specially designed Indexed Universal Life (IUL) policy

Each has a role—but they are not interchangeable.

Let’s break them down clearly and, more importantly, explain when each works best.

1. The 529 Plan: Efficient, but Narrow

A 529 plan is designed for one primary purpose: education funding.

Key Characteristics

  • Funded with post-tax dollars

  • Grows tax-free if used for qualified education expenses

  • Withdrawals for non-education uses trigger income tax on gains + a 10% penalty

  • No income limits to contribute

  • Beneficiary can be changed

When a 529 Works Best

  • You are highly confident the child will attend college

  • Education is the sole objective

  • You value simplicity over flexibility

The Overlooked Risk

What if the child:

  • Doesn’t attend college

  • Receives scholarships

  • Chooses a non-traditional path

  • Becomes ineligible for assistance

You may end up with money that is tax-penalized or awkwardly repurposed.

A 529 is effective—but it is a single-use tool.

2. The Universal Savings Account (USA): Broad Access, Still Evolving

The Trump Account (currently proposed and expected to roll out beginning in July of 2026) is intended as a general long-term savings account for children, without the earned-income requirement of a Roth IRA.

Key Characteristics (as proposed)

  • Contributions allowed without earned income

  • Post-tax funding

  • Invested in broad market index strategies

  • Intended for long-term use (retirement, education, or future needs)

  • Tax treatment still subject to final IRS guidance

When a US Account May Make Sense

  • The child has no earned income

  • You want a market-based accumulation account

  • You are comfortable with future rule changes and uncertainty

The Reality Check

These Accounts may become useful—but today they remain:

  • Unproven

  • Rule-dependent

  • Lacking the tax certainty and control of more established vehicles

Think of this as a “wait-and-see” tool, not a cornerstone strategy—at least initially.

3. The IUL: The Most Flexible (and Most Misunderstood) Option

An Indexed Universal Life (IUL) policy—is not an education plan at all.

It is a multi-purpose financial chassis. It’s flexible with far fewer constraints.

What an IUL Really Does

  • Uses post-tax dollars

  • Grows tax-deferred

  • Allows tax-free access via policy loans

  • Is not restricted to education

  • Provides a permanent death benefit

  • Can function as:

    • Education funding

    • Opportunity capital

    • Emergency liquidity

    • Tax-free retirement income

    • Legacy transfer

The Features Most People Miss

1. Options - No Penalties, No Forced Decisions

If the child:

  • Goes to college → funds can be accessed

  • Doesn’t go → nothing breaks

  • Needs money for a home or business → still accessible

  • Never uses it → heirs receive a tax-free death benefit

2. Downside Protection

Unlike market accounts, IULs typically include:

  • A 0% floor (no loss in down years, excluding charges)

  • Participation in market gains without direct market exposure

This makes IULs especially powerful during early funding years and distribution years later in life.

3. Control Across Generations

  • Parent or grandparent retains ownership

  • Funds are not automatically handed to an 18-year-old

  • Acts as a soft spendthrift structure

4. Tax Diversification

IULs create a tax-free bucket that does not:

  • Increase provisional income

  • Trigger capital gains

  • Create required minimum distributions

This becomes far more valuable as tax brackets rise over time.

When Each Tool Is Best Used

Use a 529 When:

  • Education is the only goal

  • You want a straightforward, education-only solution

  • Flexibility is not a priority

Consider a USA When:

  • You want a simple market-based savings vehicle

  • Earned income is unavailable

  • You accept regulatory uncertainty (but should you?)

Use an IUL When:

  • You want maximum flexibility

  • The future path is unknown

  • You value tax-free access, control, and legacy planning

  • You want one vehicle that can adapt over decades

The Strategy Most Families Miss

This is rarely an either/or decision.

The most effective planning often looks like this:

  • 529 for baseline education funding

  • IUL for flexibility, protection, and long-term tax control

This layered approach avoids over-funding a single-purpose bucket and creates options instead of constraints.

Final Thought

Education is important. But financial flexibility is more important.

When planning for a child or grandchild, the question isn’t:

“How do I pay for college?”, but rather

“How do I fund whatever future they choose—without tax regret?”

That is where a properly designed IUL quietly outperforms expectations.

Want to Explore an IUL for Your Family?

If you are a parent or grandparent wondering how to balance education funding, tax efficiency, and long-term flexibility, I offer a no-obligation review to see if an IUL is for you and your family.

Final thought - the best plan isn’t the one with the best headline—it’s the one that still works when life doesn’t follow the script.