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What is a 1035 Exchange?

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1035 refers to a provision in the tax code which allows for the direct transfer of accumulated funds in a life insurance policy, endowment policy or annuity policy to another life insurance policy, endowment policy or annuity policy, without creating a taxable event.

Title 26, Subtitle A, Chapter 1, Sub chapter O, Part III, Section 1035
states that "no gain or no loss shall be recognized on the exchange" of a life insurance policy for another life insurance policy or endowment or annuity policy.

An endowment for another endowment with a maturity no later than the maturity date of the endowment being replaced.

An annuity policy for that of another annuity policy.

The 1035 exchange is one of the few parts of the tax code that works in your favor. For example, when you sell shares of stock to buy shares of a different company, the profits on your investment are subject to taxes. By contrast, utilizing a 1035 exchange allows you to exchange one non-qualified annuity for another, with the interest earnings from your original policy still tax-deferred until you take the funds out of annuities for good. A non-qualified annuity is one that is funded with money not associated with a tax qualified retirement account, such as an IRA or 401k plan.

AnnuityAdvantage.com offers our free Annuity Exchange service to all annuity owners, whether or not they are current customers. With this service, an AnnuityAdvantage specialist examines your current annuity to let you know how it compares to newer products on the market. There is never any obligation to take advantage of this free service. The choice to exchange is always yours. 

Simply complete this simple form or call 1-800-239-0356 to get an instant check-up over the phone.

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