Funding hybrid long-term care insurance using a 1035 exchange is a popular way to acquire long term care protection. This IRS code allows for a tax-free transfer of an existing insurance policy for another one of like kind.1 Examples are:
➤ Life Insurance to Life Insurance
➤ Life Insurance to Annuity
➤ Annuity to Annuity
One of our licensed professionals can provide you with details and product recommendations.
Get Details >The Pension Protection Act of 2006 modified the 1035 Exchange code.2 This change allowed for life insurance and non-qualified annuity 1035 exchanges into long term care products. Both traditional and hybrid long-term care policies are included. To qualify, the contract or policy owner must meet certain criteria:
A 1035 exchange defers the internal build up of gains associated with your life insurance policy.
With annuities, a 1035 exchange may allow you to convert an existing annuity into a long-term care annuity. This can defer the gains associated with your annuity.
Because of the tax-free nature of long-term care insurance, an exchange ensures the taxable gain disappears if it’s used to pay for long-term care expenses.