1035 exchanges are among the easiest and most common ways to access PPLI or PPVA using an insurance policy or annuity you already own.
IRC Section 1035 allows the tax-free exchange of a life insurance policy for another life insurance policy. Your previously funded life insurance policy can be exchanged tax-free for a Private Placement Life Insurance (PPLI) policy.
1035 exchanges also apply to annuities. You can exchange your current annuity for a Private Placement Variable Annuity (PPVA).
Section 1035 states that these exchanges can occur without the owner recognizing any tax gain or loss. Furthermore, in the case of an annuity, the cost basis of the original annuity will be maintained in a 1035 exchange to a new annuity.
A 1035 exchange allows you to transfer the value of an existing life insurance policy or annuity into a Private Placement Life Insurance (PPLI) policy or a Private Placement Variable Annuity (PPVA) without recognizing any tax gain or loss. This tax-free exchange preserves your wealth by avoiding immediate tax liabilities, allowing your investments to grow more effectively.
You can access a broader range of investment options and strategies by converting your current life insurance policy or annuity into a PPLI or PPVA. These private placement products offer more sophisticated and potentially higher-yielding investment opportunities tailored to meet the unique needs of high-net-worth individuals.
When exchanging an annuity, the cost basis of the original annuity is maintained. This benefit ensures that future withdrawals from the new annuity are taxed based on the original investment amount, potentially reducing the taxable portion and preserving more of your wealth for future use or your beneficiaries.
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