Understand Financial Terms - Make Better Financial Decisions
This practical financial dictionary helps you understand and comprehend more than 100 common financial terms. It was written with an emphasis to quickly grasp the context without using jargon. Every terms is explained in detail with 600 words or more and includes also examples. It is based on common usage as practiced by financial professionals.
Financial Terminology Made Simple
This book is useful if you are new to business and finance. It also includes over 100 most popular financial terms for investors and entrepreneurs. It also covers the lingo that was introduced in the financial crisis of 2008 until 2016. With the alphabetical order it makes it quick and easy to find what you are looking for.
Financial Dictionary Series
Additional financial dictionaries are available in this series. Please also check out: Banking, Retirement, Corporate Finance, Economics, Investments, Laws & Regulations, Real Estate & Trading. There is also a premium edition available, which covers over 900 financial terms. Please click on the author link below the book title to see a list of other financial books.
Here are some reviews from readers:
This Should Be in Every Home & Office Library!
Whether you are a layperson or someone working within the various fields of finance itself, this is an indispensable reference book to have at your fingertips. It not only defines the specific words and phrases but clearly explains the concepts behind them. In our current world of nanosecond trading, wildly fluctuating global markets and ever more 'creative' financial instruments, this essential volume belongs in everyone’s library, virtual or otherwise! Martin Steiner
What is a 1035 Exchange?
A 1035 Exchange is an exchange process that permits individuals to replace their existing life insurance policy or annuity contract with a similar new contract or policy. Thanks to a provision in the tax code, this can be affected without suffering any negative tax repercussions as part of the trade off exchange. The Internal Revenue Service permits those who hold these kinds of contracts to update their old policies and annuities with those more modern ones that include better benefits, superior investment choices, and lower fees.
The 1035 Exchange is also called a Section 1035 Exchange after the tax code section for which it is named. It literally permits policyholders to transfer their funds out of an endowment, life insurance policy, or annuity into a newer similar vehicle. The way it works is to allow holders to defer their gains. When all of the received proceeds of the original contract become transferred to the newer contract (as there are simultaneously not any loans outstanding on the prior policy), no tax becomes due at point of exchange. Should these proceeds be received and not exchanged according to the 1035 Exchange rules, then all gains obtained out of the first contract become taxable like ordinary income, and not as capital gains.
Gains do not refer to all money received. Instead they are the result of subtracting the gross cash value from the premium tax basis. This basis refers to the original dollar amount put into the contract itself minus the premiums paid for extra benefits or any distributions which qualify as tax free.
In order for this 1035 Exchange to make sense, it has to benefit the policy holder either economically or personally. It is also important for holders to never terminate their in place insurance policies until the newer policy has been fully issued and becomes effective. The holders need to contemplate any health changes since the original policy started. It might cost extra premiums in order for the newer policy to cover them. They might even receive a denial of coverage if the changes in health are too drastic. Similarly, if the holder is well advanced in age, the premium rate may increase.
Some policies also have surrender charges that must be considered. There may be different guarantees, provisions, and interest crediting in the newer policy as well. Most importantly, benefits of the newer policy have to be carefully reviewed. These may change negatively in some cases.
There are rare cases where simply surrendering an existing insurance policy or annuity is more advantageous than engaging in a 1035 Exchange. These primarily occur when the existing contract offers no gain. Sometimes outstanding loans on the initial policy also decrease the benefits of an exchange. In other cases, the original policy may have a “market rate adjustment” type of provision. This would cause the exchange proceeds to be less than those offered in a surrender.
It is usually the case that such a 1035 Exchange will be slower and more involved than simply surrendering the holder’s original policy. It can even require a few months much of the time. This is why the conditions that affect the practicality of the exchange include financial conditions of the initial policy carrier, the country’s economic climate at the time, and the intentions of the policy holder.