1035 Exchange Life Insurance Annuity

1035 Exchange Life Insurance Annuity

If you’re holding on to an older life insurance policy or annuity that no longer fits your needs, there’s a powerful financial strategy you should know about: the 1035 Exchange.

This often-overlooked section of the tax code can help you upgrade your financial products without triggering taxes—and that could save you thousands while better aligning your coverage with your goals.

📘 What Is a 1035 Exchange?

A 1035 Exchange refers to Section 1035 of the IRS tax code, which allows you to transfer the cash value of an existing life insurance policy, endowment, or annuity into a new one—without paying current taxes on the gain.

The key? It must be a “like-kind” exchange—meaning:

Life insurance → Life insurance

Life insurance → Annuity

Annuity → Annuity
(Note: You cannot go from annuity to life insurance.)

✅ Benefits of a 1035 Exchange

1. Tax-Free Transfer
One of the biggest advantages is avoiding a taxable event. You get to roll over gains from the old policy into the new one without losing value to taxes.

2. Upgrade to Better Products
Insurance products have improved over the years. A 1035 exchange allows you to:

Lower your premiums

Get living benefits (like long-term care riders)

Move to indexed or variable annuities with more growth potential

3. Realign Your Financial Strategy
Maybe you bought life insurance when your kids were young, but now you’re more focused on guaranteed retirement income. A 1035 exchange lets you shift into an annuity that fits your current stage of life.

4. Consolidation and Simplification
If you have multiple policies or contracts, combining them through a 1035 exchange can simplify your portfolio and make management easier.

5. Avoid Surrender Fees (in some cases)
Some newer contracts allow partial 1035 exchanges or waive surrender charges if you’re upgrading with the same carrier.

⚠️ Things to Consider Before You Exchange
A 1035 exchange isn’t always the right move. Here’s what to watch for:

New policy fees or higher costs

Surrender charges on the current policy

Loss of grandfathered benefits or guarantees

You may need to requalify medically for new life insurance

That’s why it’s important to work with a fiduciary advisor—someone who puts your best interest first and helps you evaluate all the angles.

📞 Is a 1035 Exchange Right for You?

At Mintco Financial, we help clients across the country evaluate whether a 1035 exchange makes sense for their goals. We take a personalized approach and walk you through:

Policy analysis

Side-by-side comparisons

Tax considerations

Long-term planning

👉 Ready for a Free Policy Review?
Let’s see if a 1035 exchange could help you gain more benefits, flexibility, and peace of mind.

Mintco Financial
Independent. Fiduciary. Focused on You.