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Seamless transfers are the key to quickly funding your annuity business.

Transfers are one of the biggest reasons for new applications to get hung up at the home office. After all, new policies can’t get issued until the funds arrive. So it important to ensure that you are filling out the transfer request form correctly. Here are a few things to keep in mind:

  • Transfers must always be “like-to-like” regarding the owner(s)/annuitant(s) and the type of funds (Qualified/Non-Qualified).
  • A 1035 exchange refers only to Non-Qualified funds. This allows the gains from a current annuity to be transferred without taxation to the new annuity. You must take the time to get the phone number and address of the transferring company, including a current statement. I usually suggest that you make a call with the client to their current Carrier to get all the correct information. If there is a surrender charge, you must have all the facts to do the suitability comparison.
  • A direct transfer is typically used for Qualified accounts and is the most efficient way to move funds from the current financial institution to the new Carrier. Because it is a “direct” payment from one institution to the other, there is no tax consequence to the client. This also prevents the client from having to deal with a “60-day” rollover rule.
  • A rollover transfer is another way for Qualified funds to move without a tax consequence, although it is a little more cumbersome than a direct transfer. Rollover checks are made payable to the client and they have 60 days to fund a new qualified account. If that deadline is missed, the funds become taxable to the client. Additionally, the IRS places a limit of 1 rollover per 12-month period—per IRA account.

Another important consideration is surrender charges. Annuity companies are becoming more strict on moving funds with a surrender charge. They usually ask for you to explain why you are moving funds with a surrender and why you chose the product. If you are moving for a bonus, that does not necessarily justify the transfer with most companies. Take the time to make the right decision for your client.

Finally, let your clients know that transfers take time. Carriers will not send out the transfer request until your application is through suitability and keep in mind that the transferring company is never in a hurry to release funds. Most of the time they will send a “scary” conservation letter to your client. Be proactive by preparing your clients for this letter, and set the correct expectations with them regarding time-frames. This will result in a smoother process and a happier client!

Remember, the Wealth Watch Partners team is here for you! Give us a call with any questions, our job is to help you process your business faster!

—Sharon McCauley, Annuity Specialist, Wealth Watch Partners

December 2020

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