LIFE ONLY AGENTS - Do you know about the partial 1035 exchange and a Split Annuity? Watch this!

For Information ONLY - Please comment if you can help verify or correct any of the information in this video. I do not offer tax advice and I am not a tax professional. I am an Annuity Expert though!

In this video I look at the Partial 1035 exchange rules and how they have changed since inception.

The newer 2011 guidance by the IRS seems to indicate a partial exchange into an immediate annuity for at least a 10 year term certain or a life contingent based income will NOT cause the aggregation of the cost basis.

In this $509,000 sample Combo/Spit annuity 30% is allocated to the Single Premium Immediate Annuity (SPIA) and 70% into the Multi-Year Guarantee Annuity (MYGA).

The cost basis is split as well with 30% going to SPIA and 70% to MYGA

Using a Split Annuity the income side offers $1,446 monthly of which 47% is tax excluded. If $767 is taxable at 25% bracket the after tax income is about $1,254

Simply stripping the interest with an interest rate of 3.55% will give about $1482 monthly. If $1,482 is taxable at 25% bracket the after tax income is about $1,112

$192 tax on the SPIA income payment
$370 tax on the MYGA interest only withdrawal

References:

PDF IRA Serial Annuities 1035 exchanges - https://www.irs.gov/pub/irs-drop/rp-11-38.pdf

PDF Rev. Proc. 2011-38 IRS Rules - https://img1.wsimg.com/blobby/go/369500a8-c330-416e-9301-24889d16b18d/downloads/IRS-Rules.pdf

Agents only piece: Nationwide Annuity partial 1035 exchange rules by Thomas H. Duncan, JD, CLU, ChFC - https://img1.wsimg.com/blobby/go/369500a8-c330-416e-9301-24889d16b18d/downloads/Partial%201035%20Exchange%20rules.pdf

The Tax Adviser page link - https://www.thetaxadviser.com/news/2011/jun/20110628.html

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Thank you to:
Gary Mettler @ https://www.linkedin.com/in/gmettler/
The Standard Insurance
IRS.gov