Q:

How do you transfer an annuity?

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Quick Answer

To transfer an annuity, you must use a 1035 transfer, check the old annuity contract to see whether a penalty applies if you cash out the contract early, and consider a partial 1035 transfer. Other steps include filling out the annuity paperwork and tracking all the money put in both contracts, reports the Nest.

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Full Answer

The 1035 transfer is the tax-free transfer made from the annuity of one insurance company to another. The transfer shields you from penalties and taxes. To make the transfer, the owner fills out a special paper and then checks "1035 transfer," explains the Nest. Checking the old annuity contract to see if a penalty applies when you cash out the contract early is important. All contracts have tables of contents with penalties and fees sections. Count the birthdays from the date you bought the contract, and find the number of penalties by seeing the number of years on the contract chart.

The person making the transfer should then consider a partial 1035 transfer if he discovers that he can owe a penalty for surrendering early. However, some companies do not allow partial transfers, and it is important to check with the receiving and present company, advises the Nest. Filling out the annuity paperwork is a must. The name on the new contract should match the one on the old contract. However, you cannot make a 1035 transfer from a joint ownership account to one held by only you.

Tracking all the money put into both contracts is the last step. The old company asks for its annuity contract back after you surrender it for a transfer. Know the initial amount submitted to the company and all deposits made to the old contract, suggests the Nest.

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