A “ten thirty-five exchange” or “1035 exchange” is a tax-free exchange of:
- An existing life insurance policy for a new life insurance policy, or
- An existing life insurance policy for a new annuity policy, or
- An existing life insurance policy for a new qualified long term care policy, or
- An existing annuity policy for a new annuity policy, or
- An existing annuity policy for a new qualified long term care policy, or
- An existing qualified long term care policy for a new qualified long term care policy.
Section 1035 of the Internal Revenue Code (IRC) regulates this type of Tax Free Exchange between life insurance, annuity policies, and long term care insurance, hence the name of this website.
A key requirement of a 1035 Exchange is that the owner not be in constructive receipt of the surrendered policy value. In cases where the old and new insurance companies are different, this is generally accomplished by the policy owner assigning the existing policy to the new company, who will then surrender the old policy after the new one is issued, and accept delivery of the surrendered policy's values directly from the old company, and apply them to the new policy.
Why would you want to exchange an old policy for a new policy? There are many reasons, some of which are explained on the next page: Why?
For a FREE initial consultation with a life insurance agent that specializes in Section 1035 exchanges, call today: (800) 680-5596
Avoid the Tax Trap! Uncle Sam wants to tax your life insurance cash values, or your annuity cash values. A 1035 Tax Free Exchange can avoid, or at least defer, taxes.
There are many types of Living Benefit riders available for an annuity.