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1035 Exchange: Is It A Good Option? | IBC Global, Inc - YouTube
Channel: Insurance Business Concepts (IBC) Global
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the 1035 exchange so this is a good option聽
to be aware of if I have a cash value life聽聽
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insurance policy that wasn't set up right it's not聽
performing something's wrong with it it doesn't聽聽
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fit my needs anymore and I'm considering a new聽
one what am I going to do with the old one well聽聽
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in 1035 exchange is an option we're gonna provide聽
some detail as far as to what it is how it works聽聽
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and some pros and cons to it so what it is the聽
1035 exchange transaction allows me to take the聽聽
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cash value from one life insurance policy the net聽
cash values with the whole life it's my cash value聽聽
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if I'm moving in from a universal life policy聽
it is the surrender value I can roll it over聽聽
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or transferred to a new cash value policy now the聽
nice thing about it is that the transfer in itself聽聽
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is tax-free so if I have a gain on the policy聽
and I were to withdraw it there would be taxes聽聽
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on the gains this is a nice way in which I can聽
roll it over or transfer it completely tax-free聽聽
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the transaction itself will allow for a cash value聽
life insurance policy to be transferred to another聽聽
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life insurance policy or to an annuity so next聽
couple bullet points here what I like about it聽聽
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is it does allow for one to infuse a large amount聽
of piays into a policy right off the bat there we聽聽
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go we've got an exception to the base premium聽
and PUA limits so we we often talk about you聽聽
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hear me say all the time is 1090 split or if we聽
use one of the major mutual companies wherever聽聽
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I set my minimum base premium I can pay 10x that聽
into PU as per year and some companies will cap聽聽
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you kept me out of that some won't depend on聽
the insurance company with that said a 1035聽聽
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exchange is a great way to exceed those limits so聽
a company may connect me or limit me a 10x my base聽聽
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premium to pee ways but then if I have a large聽
1035 exchange that could be an additional 10 X聽聽
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or a hundred X now it does depend on the company聽
some have limits on 10:35 s whether it is a total聽聽
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dollar amount or if it's a limit the base premium聽
might only be able to go as low as 5% could be a聽聽
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number of things that's more company material聽
we want to be aware of but what we have is a聽聽
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large PUA infusion exception to the base premium聽
and PUA limits and then some nice bullet points聽聽
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here we see that the 1035 exchange can cover聽
the base premium in year 1 and what that means聽聽
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is I can in effect as a policyholder have a zero聽
out-of-pocket meaning if I'm rolling over fifty聽聽
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thousand or five hundred thousand dollars from an聽
old old policy I don't have to pay the premium at聽聽
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all in the first year I can have the transfer go聽
into PU ace but before does that cover the base聽聽
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premium and then the excess goes into P ways聽
depending on the situation and what my needs聽聽
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are how I'm looking to set up a policy we could聽
potentially have zero out-of-pocket indefinitely聽聽
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we've seen this in cases where we always present聽
it and a lot of times a policyholder I can decide聽聽
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to execute one thing and then change my mind and聽
adjust my course as time passes but you can you're聽聽
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going to see an example of this as well in the聽
next video have a 1035 exchange in which I roll聽聽
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everything over pay nothing the first year and pay聽
nothing thereafter in the cash value continues to聽聽
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appreciate quite nicely if I might add as well聽
so a lot of benefits to a 1035 exchange that聽聽
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are that we want to be aware of now before we聽
consider this it is important to analyze the聽聽
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old policy and ask the question or review it聽
is it beyond the first two years regardless of聽聽
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the insurance company because if it is money can聽
go where in a policy premium or P waits what is聽聽
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the worst part about any life insurance policy in聽
respect to the cash value the first couple years聽聽
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year one and year two the insurance company takes聽
that base premium and they overcharge me for the聽聽
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cost of insurance up front why that's important to聽
mention here is if I am rolling a policy over even聽聽
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if it's within the first two years but especially聽
beyond base premium dollars I paying to the old聽聽
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policy come back to cash value I'm giving that聽
up opening a new policy yes I've got the cash聽聽
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value enhancement with a 1035 exchange but at the聽
same time I'm starting a new policy and I have to聽聽
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go through those insurance expenses again whereas聽
the old policy if I'm over them the expenses the聽聽
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first and second year I'm beyond the expenses I聽
don't have to worry about them as much anymore so聽聽
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I can I'm really starting to get into the sweet聽
spot it is important to look at that regardless聽聽
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of the company another question is improvement聽
possible depending on the company I selected in聽聽
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my MEC limit can I make tweaks to add more money聽
into pu a's adjust my base premium can I do a face聽聽
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amount or duck reduction to allocate less money聽
towards base premium more toward P ways you can聽聽
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do that kind of stuff with existing policies聽
we've got to make sure it doesn't mech and all聽聽
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that good stuff but you can make changes a lot聽
of times one is not aware of that they're only聽聽
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presented at 10:35 exchange because it's most聽
lucrative for the agent selling the new policy聽聽
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but the point here is we want to weigh out both聽
options rather than just say old one stinks let's聽聽
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go with the new one slow down can I make it an聽
improvement and if I do will that yield me more聽聽
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money with the old policy than the strategy with聽
the new one because this is our money in a policy聽聽
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we're talking about we don't want to just throw聽
it out the window so things to look at or reasons聽聽
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why a 1035 where a 1035 may be appropriate poor聽
performance poor design doesn't fit needs anymore聽聽
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and there can be a number of other reasons but聽
again what we like to do here is analyze the old聽聽
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policy if it makes sense to keep it looking at the聽
guarantees and the guarantees if it makes sense to聽聽
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keep it keep it and see what tweets you can make聽
if it makes sense to roll it over see okay we can聽聽
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roll it over how much does that hurt and the B in聽
the beginning when we actually make that transfer聽聽
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because we've got to overcome the breakeven聽
again overcome the early insurance expenses聽聽
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yes long term this will look great if I wanted聽
more flexibility and a larger company this looks聽聽
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great but these are items I want to be aware of聽
up front to prevent any chance of buyer's remorse聽聽
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that's what we're trying to make sure we prevent聽
so know this is a lot of information on our next聽聽
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video we'll cover some numbers around the 1035聽
exchange hopefully you found this helpful more聽聽
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to come hey guys Steve Parisi here if you enjoyed聽
the content you just saw please subscribe like聽聽
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