1035 Exchange

1035 Exchange1035 Exchange Rules and Ideas:

The IRS allows you to exchange an insurance contract for a new life insurance contract insuring the same person without paying tax on the investment gains earned on the original contract. This can be a substantial benefit. This is governed by Section 1035 of the IRS code and are called 1035 Exchanges.

This benefit comes with some important IRS guidelines:

  • 1035 exchange code says that the old insurance policy must be exchanged for a new policy.  You cannot receive a check and apply the proceeds to the purchase of a new insurance policy.
  • A life insurance policy to another life insurance policy
  • Life insurance policy to an annuity
  • You cannot exchange an annuity contract for a life insurance policy

Reasons to Exchange:

  • Flight to quality with a new carrier
  • Improved Insurability…Meaning you stopped smoking or lost weight
  • Better rate of return
  • Ownership changes or problems
  • Changes in your financial situation
  • You currently have too many policies and want to consolidate
  • Better features and benefits with a new policy

If you have a policy that you feel meets a reason for exchange, we can help you do a 1035 exchange and will not trigger any tax consequences for you. Contact Us.  Ginn Insurance would enjoy helping you.

  • We’ll help compare your current contract with other available options.
  • Once you decide to exchange the contract, we can facilitate the completion of the new insurance company’s 1035 exchange and replacement forms, etc.

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