Section 1035 Exchange

What is the 'Section 1035 Exchange'

The Section 1035 exchange is a tax-free exchange of an existing annuity contract for a new one.

BREAKING DOWN 'Section 1035 Exchange'

In order for the new contract to qualify as a Section 1035 Exchange, the policyholder must have exchanged his or her existing contract for an equivalent new contract. The annuitant or policyholder must also remain the same. Application of a check received for the old contract against the new contract does NOT qualify.

RELATED TERMS
  1. Form 6781: Gains And Losses From ...

    A tax form distributed by the Internal Revenue Service (IRS) ...
  2. Investment In The Contract

    As this term applies to annuities, the principal amount that ...
  3. Contract Unit

    The actual amount of the underlying asset represented by a single ...
  4. Job Lot

    A futures contract with a minimum trading unit smaller than the ...
  5. Forward Exchange Contract

    A special type of foreign currency transaction. Forward contracts ...
  6. Variable Annuitization

    An annuity option in which the amount of income payments received ...
Related Articles
  1. Retirement

    Introduction To Annuities: Advantages And Disadvantages

    In the last section, we explored the phases of annuities and how contributions are made to them and distributions made from them. This section covers the advantages and disadvantages of annuities ...
  2. Options & Futures

    Update Your Variable Annuity With Section 1035

    Thanks to a special tax code clause, you can surrender a variable annuity without paying income tax.
  3. Retirement

    Introduction To Annuities: Basics of Annuities

    In the introduction, we learned about the history and purpose of annuities. In this section, we will explore the mechanics of these contracts and the basic characteristics that apply to all forms ...
  4. Products and Investments

    An Annuity Lowdown for Investors and Advisors

    Knowing how annuities work starts with an explanation of what each part is. Here is a list of terms that cover the basic aspects of annuities.
  5. Retirement

    Introduction To Annuities: Indexed Annuities

    In the last section, we examined fixed annuities and the type of investor for whom they are appropriate. This section covers indexed annuities, one of the newer offerings in the insurance marketplace. ...
  6. Retirement

    Build Your Own Annuity

    Here are some tips on the different types of annuities to have in your portfolio.
  7. Financial Advisors

    Annuities and Baby Boomers: The Pros and Cons

    The pros and cons of annuities that Baby Boomers seeking retirement income need to know.
  8. Retirement

    How Are Variable Annuities Taxed?

    Before investing in a variable annuity, discuss your personal financial picture with a knowledgeable financial advisor.
  9. Retirement

    Introduction To Annuities: Variable Annuities

    In the last section, we examined indexed annuities and their components. In this section, we will examine the third major category of annuities. Traditionally, variable annuity investors have ...
  10. Retirement

    Is Annuitization Your Best Strategy?

    Annuitization has traditionally offered annuity owners a stream of income they cannot outlive, but there are some disadvantages to this form of payout. Consider alternatives, such as income-benefit ...
RELATED FAQS
  1. What is a tax-free 1035 Exchange?

    A Section 1035 Exchange refers to the replacement of an annuity or life insurance policy for a new one without incurring ... Read Answer >>
  2. What is a forward contract against an export?

    Understand forward exchange contracts in exporting, and learn the purpose of using a forward contract and its advantages ... Read Answer >>
  3. What is the difference between forward and futures contracts?

    Fundamentally, forward and futures contracts have the same function: both types of contracts allow people to buy or sell ... Read Answer >>
  4. How do the investment risks differ between options and futures?

    Learn what differences exist between futures and options contracts and how each can be used to hedge against investment risk ... Read Answer >>
  5. What does a futures contract cost?

    Learn about values of futures contracts and the initial margin a trader must place in an account to open a futures position, ... Read Answer >>
  6. How can a futures trader exit a position prior to expiration?

    A futures contract is an agreement to buy or sell a commodity at a pre-determined price and quantity at a future date in ... Read Answer >>
Hot Definitions
  1. Law Of Demand

    A microeconomic law that states that, all other factors being equal, as the price of a good or service increases, consumer ...
  2. Cost Of Debt

    The effective rate that a company pays on its current debt. This can be measured in either before- or after-tax returns; ...
  3. Yield Curve

    A line that plots the interest rates, at a set point in time, of bonds having equal credit quality, but differing maturity ...
  4. Stop-Limit Order

    An order placed with a broker that combines the features of stop order with those of a limit order. A stop-limit order will ...
  5. Keynesian Economics

    An economic theory of total spending in the economy and its effects on output and inflation. Keynesian economics was developed ...
  6. Society for Worldwide Interbank Financial Telecommunications ...

    A member-owned cooperative that provides safe and secure financial transactions for its members. Established in 1973, the ...
Trading Center