I do this every year. My daughter's phone is always 2 years old, I use her upgrade and buy the new phone, then hand her my 1 year old phone and get ATT to switch the numbers.
This way I always have an upgrade available every year.
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No, it's not as simple as switching the sim cards. They will use your IMEI number (go to settings, general, about and scroll down) to program the right number to the right phone. And yep, they can do this over the phone.