Real estate investors are familiar with the idea of a 1031 exchange that allows them to exchange like-for-like value from one real estate asset to another without paying capital gains tax. Similarly, you can exchange permanent life insurance polices using a 1035 exchange without creating a tax obligation.

While 1031 and 1035 exchanges are similar in spirit, because life insurance is an actuarial product, there are unique and significant tradeoffs that need to be considered when exchanging life insurance policies.

Episode Highlights:

0:00 - Introduction

0:30 - Exchanging to get an "IBC Policy"

1:04 - What is a 1035 Exchange?

1:45 - Everything is a tradeoff

2:00 - How is a 1035 Exchange done?

5:09 - Can the existing advisor hold this up?

6:00 - Why would someone do a 1035 Exchange?

7:30 - Rule of thumb is to NOT to exchange a policy

8:23 - Analyzing the decision to exchange

12:35 - Misunderstandings and misconceptions of 1035 Exchanges

19:35 - You must be your own advocate. Is there any reason not to check back with your original Agent?

22:15 - There are many options in life insurance. Don't get caught up with random details justifying an exchange

23:00 - Nelson Nash Institute - A higher level of professionalism

23:55 - Sales commissions

26:35 - Good reasons to exchange (whole life to whole life)

29:33 - Exchanging from IUL/VUL to whole life (Reference Episode 37)

33:40 - Taking back control and guarantees with whole life insurance - A peaceful state of mind

35:05 - Becoming your own banker - there is only one true "permanent" life insurance and that's whole life