"All parents have college problems, rich or poor," said Raymond Loewe, founder of College Money, a college savings consulting firm. But Lowe considers 529 plans overly complex vehicles that favor wealthy investors. Instead, he favors variable universal life policies.

Planning for college can be considered a subset of retirement planning, according to Loewe, and an important part of college planning is remembering to set aside enough money for clients’ retirements after the last child has graduated.

Loewe said advisers typically make several mistakes when setting aside money for college, including overvaluing the impact of taxes while underweighing the impact of financial aid, not starting early enough or not adapting a college savings plan to a client’s changing circumstances.

Taking a contrarian approach, Loewe does not favor Section 529 plans as college savings vehicles. "Section 529 plans are very complicated animals," he said, because they are not financial-aid friendly and favor the wealthy.

In addition, since 529 plans are relatively new, advisers do not have a lot of investment history to use in choosing a plan. Instead, they should look at fund management, state tax benefits and any "quirky factors" during their due diligence processes.

As an alternative vehicle, Loewe suggested using a variable universal life policy -- provided it’s used correctly. "First, you need a high-tax-bracket player to take advantage of the plan. Second, you need to structure the plan in favor of cash-value development and minimize the amount of life insurance involved," he said, adding that advisers have more choice over the management of the policy and the client does not get penalized if the money is not used for college.

This story was adapted from a story that appeared on Financial Planning Interactive.

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