Disadvantages Of A “1035” Exchange
Consider 1035 Proposals As Red Flags
Annuity Transactions And Tax Consequences
Our litigators recommend against annuities, especially for seniors. If you already own an annuity, be extremely cautious whenever an agent or advisor recommends you replace or exchange it, especially if the idea is a “1035” exchange or transfer. That should be a red flag for you: Section 1035 of the Internal Revenue Code allows certain annuity-for-annuity exchanges to occur tax-free. But the rules for such exchanges are extremely strict and any mistake by the agent or transferring or receiving carrier can land you with a big tax bill.
Even if the transaction is done properly, it does not mean it’s a good idea. You will pay surrender charges on the contract you are surrendering and commissions and fees for your new contract. You will reset the clock on surrender penalties and find it even longer before you can withdraw your money without penalty. You will forfeit any death benefits or so-called bonuses you had under the old policy. All of this can add up to a big loss even if the transfer is tax-free theoretically. The San Francisco and California annuity and financial elder abuse attorneys at Evans Law Firm, Inc. represent clients who have suffered surrender charges and tax liabilities as a result of improper annuity replacements or exchanges by commission-driven brokers. If that’s happened to you, contact our attorneys at (415) 441-8669, and we can help.
If after getting a second opinion (from a professional with nothing to gain in the transaction) you’re still convinced a 1035 is a good idea, the most important thing to know about executing a 1035 exchange is this: Do not liquidate your existing annuity with the intent of using the money to buy another. That would not be a tax-free exchange. That would be a taxable transaction. Instead, the exchange must occur directly between the two insurance companies. The bottom line here is that any proposed 1035 exchange should be a real red flag for you and a warning to proceed very cautiously and only after conferring with your tax advisor.
If you or a loved one has suffered a loss on the surrender or exchange of an annuity or been a victim of financial elder abuse contact San Francisco and California annuity and financial elder abuse attorney Ingrid M. Evans and the other attorneys at the Evans Law Firm today at (415) 441-8669, or by email at <a href=”mailto:firstname.lastname@example.org”>email@example.com</a>. Our attorneys have experience with complex financial contracts and large insurance companies. We can help guide your case through a jury trial or toward an equitable settlement. We also handle cases involving physical and financial elder abuse, other types of qui tam and whistleblower cases, nursing home abuse, whole life insurance and universal life insurance, and indexed, variable, and fixed annuities.
Leading providers and distributors of life insurance and fixed, variable and fixed indexed deferred annuities in California are listed below. We are not in any way suggesting that any of these carriers or distributors has done anything wrong. Rather, the list is provided solely as a reference for our readers.
AIG/American General Life Insurance Company
Allianz Life Insurance Company of North America
American Equity Investment Life Insurance Company
American General Life Insurance Company/AIG
American International Group, Inc. (AIG)
American National Life Insurance Company
Athene Annuity & Life Assurance Company
Athene Annuity and Life Company
Aviva Life Insurance Company
AXA Equitable Financial Services, LLC
AXA Equitable Life Insurance Company/AXA US
AXA Advisors, LLC
Brighthouse Financial, Inc./MetLife
EquiTrust Life Insurance Company
Fidelity & Guaranty Life Insurance Company
Genworth Financial, Inc.
Genworth Life and Annuity Insurance Company
Genworth Life Insurance Company
Guggenheim Partners, LLC
Guggenheim Partners/Security Benefit Life Insurance Company
ING USA Annuity and Life Insurance Company
Jackson National Life Insurance Company
John Hancock Life Insurance Company
Lincoln Benefit Life Company
Lincoln Financial Group
Massachusetts Mutual Life Insurance Company
Metlife/Metropolitan Life Insurance Company/Brighthouse Financial, Inc.
Minnesota Life Insurance Company
Nationwide Investor Services Corporation (NISC)
Nationwide Life and Annuity Insurance Company
Nationwide Life Insurance Company
New York Life Insurance Company
Northwestern Mutual Investment Services, LLC
Northwestern Mutual Life Insurance Company
Northwestern Mutual Wealth Management Company
Pacific Life & Annuity Company
Pacific Life Insurance Company
Security Benefit Corporation
Security Benefit Group, Inc.
Security Benefit Life Insurance Company/Guggenheim Partners
Security Investors, LLC
Security of Denver Life Insurance Company/Voya
Transamerica Life Insurance Company
Voya Financial Advisors
Voya/Reliastar Life Insurance Company
World Financial Group Insurance Agency, Inc