Getting Full Trade-In Value For Exchanged Policies
We all know when you buy a car not to let the dealer know you have a trade-in until the terms or the new automobile are negotiated. Otherwise, the salesperson can more easily make a less than competitive offer on the ole rust-bucket/clunker/hooptie and hide it in the overall transaction for both vehicles.
A loss can also occur when trading in an old life insurance or annuity policy using the cash value for a new contract more suitable for a client’s current needs. Surrender of the existing contract triggers income tax on any gain in the policy value, leaving less to purchase new coverage.
Fortunately, IRC 1035 allows a non-taxable exchange, but here the trade-in must be in the picture upfront.
Because the transfer of funds must be carrier-to-carrier there are additional steps in the 1035 exchange process, which we will do for you:
- After you have submitted the application we will take all steps to see that all replacement paperwork (much of which cannot be done online) is completed in a proper and timely manner.
- We determine the exact amount of the old policy value that is to be rolled over and ensure that your sales illustration reflects that amount.
- Once we have received approval for the new coverage, we will see that the old carrier transfers the funds promptly so the new coverage can get in force.
Contact Tom Virkler, JD – Director of Advanced Markets, at tom@cpsadvancedmarkets.com or 706-614-3796 with all your casework that anticipates a 1035 exchange and we will help your clients maximize their trade-in value by taking effective advantage of this tax-saving opportunity.