Batter Up: Repurposing Life Insurance

Gameplan Details:
Date: Wednesday, August 20th
Time: 11:30 am – 1:30 pm (Lunch will be provided)
Location: 1128 North 9th St., Milwaukee, WI 53233

Coaching Staff:

Join Scott Bachmann, CCM, Regional Vice President with E4IS, and Alexis Daughtridge, Regional Vice President with Nationwide, as they discuss how to repurpose life insurance. As clients’ financial goals evolve—due to retirement, family changes, or shifting priorities—existing life insurance policies may no longer fit their needs. An internally split 1035 exchange is a tax-efficient way to repurpose the cash value from one or more life insurance policies by moving the full value to a new insurance carrier, which then divides it among multiple new products, such as updated life insurance, LTC coverage, and annuities. This approach ensures all IRS “like to like” rules are maintained, avoiding unintended tax consequences.

Common mistakes, like attempting a partial 1035 exchange or withdrawing the basis and exchanging the gain, often trigger tax penalties because the IRS does not allow partial 1035 exchanges for life insurance. In contrast, an internally split exchange allows for a pro-rata allocation of cost basis and gain, enabling more flexible planning—such as covering LTC needs for both spouses using one policy’s value. This can even include moving qualified assets (like 401(k) funds, after moving them to an IRA) into annuities that then fund LTC insurance.

We will discuss how Nationwide, for example, offers products and streamlined processes to facilitate these exchanges, making it easier to adapt clients’ policies to their new financial goals while maintaining efficiency and tax advantages. Regular policy reviews are crucial to ensure optimal use of these options as needs evolve.

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