Section 1035 Exchanges

The purpose of this course is to provide a thorough presentation of IRC Section 1035 and an understanding of how life insurance, annuity, and long-term care contracts may be exchanged on a tax-free basis. Understanding Section 1035 is an essential part of the insurance producer’s responsibility to the client, because it offers flexibility and planning opportunities for insurance and annuity owners. However, Section 1035 rules are strict, and precise steps and procedures must be followed. Failure to properly transact a life insurance or annuity exchange in accordance with the rules of Section 1035 can have unexpected, and unnecessary, tax consequences for the contract owner, with obvious repercussions for the producer.

In addition, the course covers the important issue of suitability of policy exchanges as product replacements within the framework of NAIC model laws and regulations, state laws, and proper market conduct. The course reviews the documentation required for replacement transactions and explores questions and issues the producer must address before a replacement or exchange can be recommended.

The course covers:

  • Insurance Tax Basics
  • Qualifying 1035 Products
  • The 1035 Exchange Process
  • The Financial Professional’s Role