1035 Exchange

The term 1035 exchange refers to a provision in the tax code that allows for the transfer of one annuity contract to a different annuity contract, without triggering a taxable event. Section 1035 refers to the specific provision of the Internal Revenue Code. Life insurance contracts may also be transferred under a 1035 exchange, and a life insurance contract may be transferred to an annuity contract. The exchange may involve the same insurer or two different insurers. The type of annuity is irrelevant under a 1035 exchange. In other words, a fixed annuity may be transferred to a variable annuity and vice versa. That said, the owner of each of the contracts must be the same. A 1035 exchange only applies to the account value of an annuity contract, not the guaranteed benefit values or the death benefit values of the contract. Partial exchanges are acceptable as long as the partial funds are transferred directly into the new contract. Contract owners may not directly receive funds from the original contract—this would be considered constructive receipt and would trigger a taxable event for the contract owner. Instead, funds must flow directly from the previous contract to the new contract and carrier.

Taxes and Annuities

A good, straightforward article on how annuities are taxed from Kiplinger Contributing Editor Kimberly Lankford. There is discussion of tax implications of using qualified funds (i.e. funds from an IRA or 401k ) to purchase an annuity versus non-qualified funds. Also basic discussion of how different types of annuities such as deferrerd and immediate are taxed. 1035 exchange tax issues are also addressed. Source: Kiplinger Full Story
Key Phrases: 
Key Phrases:
Key Phrases: 

A Changing Variable Annuity Landscape -- The Consumer Perspective

This is the first part of an interview with Ryan Hinchey.

Ryan is a consulting...

Variable Annuities are Starting to Lose Appeal

Variable annuity sales had been surging prior to the onset of the financial crisis. As reported earlier , many customers who had purchased variable annuities with guaranteed living benefits (GLBs) two or more years ago have been well insulated from the financial storm. However, the current environment for variable annuities and living benefits is vastly different than it was even a year ago. Insurers are now increasing prices and scaling back on the richness of product features, making it a...