1035 exchange
One unique tax advantage with annuities is that you can transfer money from one annuity to another, income tax-free.
The 1035 exchange provision of the tax code allows annuity owners to:
Directly transfer the accumulated funds in their annuity policy without taxes.
Exchange products of the same company and still have their original investment still tax-deferred.
Pay their taxes when they take out their annuity money for good.
Title 26, Subtitle A, Chapter 1, Sub chapter O, Part III, Section 1035 states that "no gain or no loss shall be recognized on the exchange of a life insurance policy for another life insurance policy or endowment or annuity policy".
