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A 1035 Exchange allows policyholders to replace an existing life insurance or annuity policy with a new one without triggering a taxable event. Named after Section 1035 of the Internal Revenue Code, this option provides a tax-efficient way to adjust your coverage or financial strategy as your needs evolve.
When you initiate a 1035 Exchange, the cash value of your existing policy is transferred directly to a new policy or annuity. This process ensures that no taxable gain is recognized during the transfer, preserving your policy's accumulated value.
Common reasons for a 1035 Exchange include seeking lower premiums, higher death benefits, improved investment options, or converting a life insurance policy into an annuity to provide retirement income.
By utilizing a 1035 Exchange, you avoid paying taxes on gains accumulated in the old policy, allowing your money to continue growing tax-deferred.
Policies purchased years ago may no longer meet your needs. A 1035 Exchange enables you to upgrade to a policy with better benefits, more favorable terms, or modern features like long-term care riders.
If your financial priorities have shifted, a 1035 Exchange allows you to transition from life insurance to an annuity, providing a steady stream of retirement income.
We thoroughly review your existing policy, offer tailored recommendations, handle the paperwork, and coordinate with the insurance providers to ensure a smooth transfer of funds.
We helped the client transition to a new universal life insurance policy by using the current policy cash value to front load the premium with a lower premium of $42,570/year for the remaining 7 years while increasing the death benefit to $1,400,000. This saved the client $32,430 annually without triggering a taxable event — a combined total savings of $227,010 and an increase of benefit by $66,300, a net difference of $293,310.
The client used a 1035 Exchange, moving the existing policy's $179,000 cash value into a new life insurance policy. By doing this we were able to get the client $307,436 in death benefit, a $36,436 increase, guaranteed for life while eliminating all future insurance premiums. The client will no longer have to pay a premium and will increase his coverage.
Reach out today and let's build a plan around your goals.