Tax Free Exchanges: Can I Move My Annuity Without Tax Liability?

By |2015-05-22T18:58:18+00:00August 28th, 2013|Annuities|

I am asked this question often.

Q. Can I move my annuity to a new company without tax liability?

A. Yes.  If you use an IRS approved 1035 exchange you may exchange your contract for a new annuity contract within your current company or you can exchange your annuity contract for a new contract in a new company.

If done properly, this exchange will not incur a tax liability, your deferred earned interest will remain deferred in the new contract.

The IRS provides information here: http://www.irs.gov/pub/irs-drop/n-03-51.pdf

One question to ask yourself (and your agent) is why?  What benefits will you be enjoying by making a change? Is it in your best interest to make a change in your current contract?

Questions to ask:

  • Will I be incurring a new series of surrender penalties by making a change?
  • Will a bonus from the new company be involved on making a change?  If so how long before the bonus is vested?
  • What is the financial rating of the new company?  Is it higher or lower rated than my current company?

About the Author:

Bill Broich
Bill Broich is a well-known annuity expert with over 30 years of experience. He has written hundreds of articles on annuities and other financial topics, and has been a featured commentator on TV, Radio and the Internet. To follow Bill's profile, click here.