Section 1035 Exchange of Insurance Policies with Loans Require Careful Attention

In Broker World’s December 2012 publication, Russell Towers gives some tips on doing Section 1035 Exchanges on insurance policies with loans to avoid the unintended result of taxable income on a discharged policy loan. IRC Section 1035 allows for the tax-free exchange of life insurance policies in a gain position so that these cash values are able to be transferred to more financially efficient policies. Basic taxation of 1035 exchanges for policies with loans is also explained in addition to a case study.

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