1035 Exchanges

Insurance needs change as your family, financial, and business needs change. Under Section 1035, federal income tax law allows certain exchanges of insurance policies that may be made without the immediate recognition of gain. The gain at the time of the transaction is deferred rather than recognized as an immediate taxable event.

Does your life insurance or annuity policy need an update? If you don’t know, the answer could be yes!

If a new product provides a more cost-effective solution than your old product, then you may consider exchanging the old policy for a new one.

Here are just a few points to consider when reviewing your old policies:

    1. You feel a higher rate of return may be realized with a new policy.
    2. You feel that the current insurer may become insolvent and a more stable insurer can be obtained through a policy exchange or diversification of insurance carriers will increase safety and/or return.
    3. You have exercised a loan provision against a policy, the interest paid on the policy is non-deductible, costs are increasing and you need to continue coverage.
    4. You can achieve a higher death benefit with a new product.

Your retirement distribution professional and tax professional can help you review your policies and identify where things are just fine and where you may be holding a policy that no longer suits your needs.

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