Co-Founder, Coastal Financial Partners Group, California
Yes, you can do a Section 1035 exchange from a life insurance contract to an annuity, just not the other way around. Section 1035 permits the policy owner to trade certain kinds of contracts for another on a tax-free basis. The following types of exchanges are allowed under Section 1035:
Life contract for life contract
Life contract for annuity contract
Life contract for endowment contract
Annuity contract for annuity contract
Endowment contract for endowment contract
Since 2010, it is also possible to exchange a life, annuity, or endowment contract for a long-term care contract or exchange one long-term care contract for another long-term care contract.
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Life contract for life contract
Life contract for annuity contract
Life contract for endowment contract
Annuity contract for annuity contract
Endowment contract for endowment contract
Since 2010, it is also possible to exchange a life, annuity, or endowment contract for a long-term care contract or exchange one long-term care contract for another long-term care contract.