Over Three Decades Of Resolving Family Law Issues In Montana

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How are IRAs divided in a divorce

On Behalf of | May 28, 2021 | Divorce |

Montana couples who are thinking of getting a divorce likely have a lot of questions running through their minds. As you think about splitting up your marital assets, your IRA account may be an issue that sparks your interest. Dividing this type of account isn’t as clear-cut as other assets like your joint checking account.

Your ex may be entitled to a portion of your funds

The asset division process is going to depend on the state that you live in and the total marital assets that you have. In most situations, you’ll likely find that your spouse is entitled to a portion of the total funds in your IRA account. It’s your job to ensure that you’re using the right procedure to transfer funds to them so that you don’t get stuck with an unwanted tax bill.

Following IRS transfer rules

One of the biggest concerns, other than the total amount of money that will be awarded to your spouse, is dealing with the tax consequences of your IRA account. To avoid having to pay for taxes associated with your spouse’s stake in your IRA, you’ll need to use the right form to transfer ownership.

This is called a Transfer Incident to Divorce form or a Qualified Domestic Relations Order. It allows the transfer of your IRA funds to your spouse to be done tax-free. When this happens, your spouse takes legal ownership of their funds in the IRA. When they take out any distributions, they will be responsible for paying the taxes on them.

Your IRA account, just like other marital assets, is divided up during the divorce process. It’s always a good idea to seek assistance when dealing with these legal processes.