How do tax-free annuity transfers work?
Internal Revenue Code Section 1035 allows you to exchange one annuity contract for another, or exchange a life insurance contract for an annuity–without having the transfer treated as a taxable event. A 1035 exchange may be appropriate if you own an older contract and wish to avail yourself of recently-created death benefit options, or if the performance of your subaccounts has been not been good.
Internal Revenue Code Section 1035 allows you to exchange one annuity contract for another, or exchange a life insurance contract for an annuity without having the transfer treated as a taxable event. A 1035 exchange may be appropriate if you own an older contract and wish to avail yourself of recently-created death benefit options, or if the performance of your subaccounts has been not been good. There are costs associated with exchanging annuities including potential surrender charges.
