1035 Survivor Policy

[onefastpony]

Is it possible to do a 1035 from three policies into one Survivor policy? There are two policies on one insured and one policy on the other. I'm wanting to combine all the cash into one Survivor policy.

 

[jmhalvo]

Is it possible to do a 1035 from three policies into one Survivor policy? There are two policies on one insured and one policy on the other. I'm wanting to combine all the cash into one Survivor policy.

Often the prems paid exceed the cash, so there is no tax anyway, right? Any chance you can just cash out, then start new policy?

 

[onefastpony]

Often the prems paid exceed the cash, so there is no tax anyway, right? Any chance you can just cash out, then start new policy?

You bring up a great point...one that I've thought about. But with doing the cash out on the policies and then dumping in the cash could trigger a MEC. I know it takes a little longer for a 1035 but I feel it would be the best way.


Let me add another twist.


This couple had an accountant at their office embezzle money from them. Now they have a personnel and a business tax lien. They are making payments to pay it off and I'm worried about the IRS implications on cashing out a policy and doing a dump in that way.


Can anyone advise me on what the implications might be in either (a) doing a 1035 into a survivor policy with the insureds having a tax lien Vs. cashing out the policies and dumping the cash in without a 1035?

 

[Tahoe Ray]

Is it possible to do a 1035 from three policies into one Survivor policy? There are two policies on one insured and one policy on the other. I'm wanting to combine all the cash into one Survivor policy.

No. 1035s must be "like to like"...same insureds/owners.

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You bring up a great point...one that I've thought about. But with doing the cash out on the policies and then dumping in the cash could trigger a MEC. I know it takes a little longer for a 1035 but I feel it would be the best way.

You can still MEC a policy with a 1035.

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Let me add another twist.


This couple had an accountant at their office embezzle money from them. Now they have a personnel and a business tax lien. They are making payments to pay it off and I'm worried about the IRS implications on cashing out a policy and doing a dump in that way.


Can anyone advise me on what the implications might be in either (a) doing a 1035 into a survivor policy with the insureds having a tax lien Vs. cashing out the policies and dumping the cash in without a 1035?

You should ask an accountant (who won't steal their money) or better yet, a tax attorney about this one.

 

[jmhalvo]

You bring up a great point...one that I've thought about. But with doing the cash out on the policies and then dumping in the cash could trigger a MEC. I know it takes a little longer for a 1035 but I feel it would be the best way. Let me add another twist. This couple had an accountant at their office embezzle money from them. Now they have a personnel and a business tax lien. They are making payments to pay it off and I'm worried about the IRS implications on cashing out a policy and doing a dump in that way. Can anyone advise me on what the implications might be in either (a) doing a 1035 into a survivor policy with the insureds having a tax lien Vs. cashing out the policies and dumping the cash in without a 1035?

Is there any gain? If not, cashing out has nothing to do with IRS etc. And you can use the cash via a SPIA to make sure it becomes non MEC.