A 1035 exchange allows you to transfer the cash value of one annuity to another annuity (or to a life insurance policy) without paying taxes on the gain. A 1035 exchange is a tax-free transfer. You must transfer directly from one insurance company to another — you cannot take a distribution and reinvest.
Key Points
- 1035 exchange: tax-free transfer from one annuity to another
- Also allows transfer from annuity to life insurance policy
- Must transfer directly from one insurance company to another
- Cannot take a distribution and reinvest
- An independent agent can help you evaluate a 1035 exchange