Tax-free 1035 exchanges to purchase LTC insurance

June 5, 2023

Would your life insurance or annuity serve you better if it included long-term care benefits?

Explore the tax advantages of exchanging your life insurance or annuity for hybrid long-term care insurance.

If you think your existing annuity or life insurance policy would protect you more if it were a long-term care (LTC) insurance policy, then a 1035 exchange may be the right solution. While certain criteria must me bet, the tax code allows for these exchanges. And because long-term care benefits are not taxable, you’ll never have to pay taxes on the gains.

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Some insurance carriers have options allowing a partial exchange of your life insurance to pay for your LTC insurance premiums.

Another option is to exchange your life insurance policy for one that combines life insurance with long-term care protection. This type of policy provides a pool of money that can be used as either a death benefit or long-term care benefit. If you don’t end up needing long-term care, then your estate will receive the death benefit. Eligible policy types for 1035 exchanges are:

  • 1035 Exchange Life Insurance to Life Insurance
  • 1035 Exchange Life Insurance to Annuity
  • 1035 Exchange Annuity to Annuity

You cannot 1035 Exchange an Annuity to a Life Insurance policy.

No matter what type of coverage you choose, protecting yourself from escalating long-term care costs is important for a secure financial future.

Connect With A Long-Term Care Advisor

Explore funding a hybrid long-term care insurance policy with an existing annuity or life insurance policy. We have highly rated companies, multiple plan options, and expert long-term care advisors. Expect personalized service on topics such as:

  Suggestions for the product best suited to your 1035 exchange

  Guidance when comparing products from multiple companies

  Assistance with health qualifying for coverage

 

Explore 1035 Exchange Options >
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The information provided is not intended to be a substitute for specific individualized tax, legal, or investment planning advice. Where specific advice is necessary or appropriate, we recommend that you consult with a qualified tax advisor, CPA, financial planner, or investment manager.