Move your annuity to add benefits without exposing yourself to tax liability
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 correctly, this exchange will not incur a tax liability, and 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 in 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?
- Ask the agent to explain their recommendation WHY?
The IRS provides information here: http://www.irs.gov/pub/irs-drop/n-03-51.pdf
