Discussion:Life insurance annuity question
From TaxAlmanac
Discussion Forum Index --> Advanced Tax Questions --> Life insurance annuity question
Discussion Forum Index --> Tax Questions --> Life insurance annuity question
| 23 January 2008 | |
| Client purchased a single premium tax-deferred annuity in 1983. Policy is now matured and they received letter stating that they have two choices with the policy: lump sum payment or periodic payments. Client was hoping to roll over into another policy and avoid cashing to policy in as client is 53 and would like to defer tax, but also like to hold this until later years.
Is it possible to do a 1035 Exchange for this policy or is it too late? | |
| 23 January 2008 | |
| yes, of course, but why would the company want to tell him about that option? | |
| 23 January 2008 | |
| I am surprised at this early age that the company is requiring either - BUT the rules were different in the 80s when this was originally set up. Out of curiosity, how did he do? | |
| 23 January 2008 | |
| Kevin,
Shouldn't the company tell him if it's an option? I think so. I just know they aren't, hence the phone call to me. I wasn't sure if it was too late due to it having matured. He has yet to receive proceeds and I figured since he had not, it appeared based on what I have read, he had some flexibility. I think they just wanted to get rid of it. He bought it for $25K, it's value now is $61K. He took a couple of $10K withdrawals in the 1990's. Tom | |
| 23 January 2008 | |
| they dont' want to tell him about the option because if he annuitizes it with them, they get to hold onto the money longer, if he 1035's it to another company, they lose it completely. Of course someone doesn't want to cash it in and pay all of those taxes!!!! So they think he won't do that option at all.
Looks like he did fairly well with it! Generally as long as the $$$ is still at the insurance company, he has the option of 1035ing it. Whatever new contract he goes to, he will have a new surrender period and someone will earn a commission. | |
| 23 January 2008 | |
| Kevin,
Good point. In reading the rulings, I do notice the contracts are shifted to other companies and I gather based on those notices, they have to be shifted from insurance company A to insurance company B, hence, they don't give you the option. I think he did well with it. I am not sure he does right now as his head is somewhere else. He's getting married Friday, so I think this will add to his happiness. Tom | |
| 26 February 2008 | |
| no, the contract owner must be the same old and new to effect a 1035. BUT many annuities owned by joint annuitants where the owners are spouses allow spousal continuation in the survivor's name only. | |
