AALTCI Publishes Consumer Guide to Section 1035 Exchanges

1035 Exchange Guide

New 1035 Exchange Guide

Millions of Americans who have existing annuity or life insurance policies can benefit from reading a new guide explaining the benefits of a 1035 exchange.

“Few individuals are familiar with Section 1035 of the Internal Revenue Code that allows an individual to repurpose an existing annuity of life insurance policy to one that includes tax-advantaged long-term care benefits,” explains Jesse Slome, director of the American Association for Long-Term Care Insurance (AALTCI). The national organization has just released the Guide To Long-Term Care Planning Using 1035 Exchanges.

The 24-page guide, accessible online, explores the basics of how 1035 exchanges can benefit individuals and includes several real-life scenarios depicting the advantages of converting existing annuities or life insurance policies. “The Pension Protection Act (PPA) enacted by Congress encourages individuals to plan for the very real risk of needing long-term care (LTC), and Section 1035 exchanges are one of today’s significant planning opportunities available,” Slome shares.

“The PPA provides meaningful tax- and long-term care planning advantages to consumers,” Slome notes. “Funds withdrawn from a traditional nonqualified annuity can be used to pay for long-term care expenses, but there will likely be tax consequences. A simple 1035 exchange to a PPA-approved linked-benefit annuity can provide 100-percent income tax-free withdrawals to pay for LTC costs.”

One of the leading providers of linked-benefit annuity and life insurance long-term care protection says many people aren’t aware of the tax implications of their current strategies.

“Americans have nearly $3 trillion in fixed and variable annuities set aside as part of their retirement planning strategy,” reports Chris Coudret, vice president and chief distribution officer at OneAmerica®. “Many of these individuals could benefit by taking advantage of a 1035 exchange, which could offer tax benefits as well as provide long-term care benefits, should they be needed. This new guide can be a tremendous help to financial professionals looking for information and resources for their client conversations.”

OneAmerica will make copies of the guide available to insurance and financial professionals.

Free Access to Read The 1035 Exchange Guide Online

“If you are 50 or older and you have an annuity or a life insurance policy, a 1035 exchange could be the ideal way to plan for a future long-term care need,” Slome suggests. “You maintain the benefits you currently have while adding some tax advantages.  For couples, there is even the possibility of using one policy to provide tax-free long-term care benefits for both spouses.”

To read the 1035 exchange guide online visit the American Association for Long-Term Care Insurance’s website at www.aaltci.org/1035-exchanges.


Established in 1998, the American Association for Long-Term Care Insurance advocates for the importance of LTC planning and supports insurance professionals nationwide.  Jesse Slome, founder and executive director of the organization, is a leading consumer advocate and author of numerous consumer and professional guides focused on retirement and insurance planning that have been published by governmental agencies and private organizations.

OneAmerica® is the marketing name for the companies of OneAmerica. AALTCI is not an affiliate of the companies of OneAmerica. Provided content is for overview and informational purposes only and is not intended as tax, legal, fiduciary, or investment advice. Before replacing existing life insurance or annuities all factors should be weighed to determine suitability.

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