Can you do a life insurance to life insurance 1035 exchange after the new life insurance policy is issued? Does it have to be done at the time of issue?
This is a really good question. Typically, an exchange is made from an existing policy to a new policy at the time the new policy is issued. The existing policy is surrendered, and the policy that has replaced it is consistent with the regulations regarding insured, owner, handling of loans, etc. This all takes place within 30 days of issuing the new policy, although I have seen extensions given due to varying circumstances. These can include delays from the existing insurer, etc.
I have double-checked my sources for rules regarding these exchanges, and have not come across a maximum time frame for making them. Does that mean you can take the money from a policy that was issued, let’s say, 10 years ago, and transfer it into a policy that was issued 5 years ago? I think you should ask the carrier of the policy into which you want to transfer the funds, if they would permit doing so. My argument to them for doing so would be that as long as you are surrendering or terminating the older policy, and observing all the rules mentioned above, why not? But there may be IRS regulations that apply. They would know.
Please let me know what they tell you.
We would love to be able to help you! However, to get started on the right foot, we have many ?’s to ask you first. We work very much like a doctor would. Keep in mind you just don’t walk into the Doc’s office and immediately get a prescription.
In fact we always say that prescription without diagnosis is malpractice.
So let’s get started…..
You can do a 1035 exchange to another carrier, or even the same carrier after the contract is issued. But watch out, there may be back end charges you will pay based on what kind of contract you purchased.
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Brett M. Sause, LUTCF®, LTCP®, CLTC®, RFC®, LACP®, FSCP®
Principal & CEO