Taking out basis first, and then doing a 1035 exchange, may run afoul of tax rules. See the text below, which is shown on page 3 of the linked website.Why not take the 598K basis out tax free from the whole life policy, leaving you with 319K to then 1035 exchange to an annuity?
The 319K would be more in line with state guarantees against failure.
https://prudential.scene7.com/is/conten ... e%20client.What is boot, and how does it apply to 1035 exchanges?
Boot is generally defined as any value from an old contract that is not transferred to a new contract. Boot is taxable to the client to the extent that there was gain in the old contract. Boot in a 1035 transaction includes:
Any outstanding loans that are not repaid and are not mirrored in the new contract.
Any cash value from the old contract that is returned to the client.
Withdrawals taken shortly before the exchange may be considered taxable as “boot.” Clients should contact a tax advisor before initiating the exchange to determine if withdrawals will be taxable as boot.
Statistics: Posted by Stinky — Fri Mar 14, 2025 5:30 am — Replies 8 — Views 520