Cross Roads Divorce Advisors,

I just finished going through a divorce and I’m wondering…can an IRA be transferred to or from my former spouse?

Thank you,

Recently Single

 

Dear Recently Single,

That’s a great question and the answer is YES.

Many divorce settlements require the transfer of some amount of funds in an IRA account from one party to the other.

We suggest this process start immediately. This way, you may be sure you have control of the assets you fought so hard for during the divorce process.

Open a new account.

In order receive the funds we suggest the transferee open a new IRA account in their individual name. If you already have an IRA account, it can be used to receive the funds.

Prepare paperwork for transfer.

Some custodians require a simple letter of authorization signed by both parties and a copy of the divorce judgment to complete the transfer. Others require signature guarantees on the letter which must be obtained from a local bank. The letter should provide the source and destination account numbers. We suggest opening the new account from step one at the same custodian as the currently existing account. It will make the transfer process easier because the custodian remains the same.

Make sure you don’t….

We strongly suggest that you do not take a distribution out of the IRA.  If you are under age 59 1/2, you will likely pay taxes and penalties on the distribution. The process you might consider is called a “trustee to trustee transfer.” It may help to contact the current custodian and simply tell them the transfer is pursuant to divorce and you would like to complete the transfer in this format.

One more thing

An IRA passes to the named beneficiary if you should pass away. Make sure you have removed your former spouse if you do not want them to inherit your share of the assets.

Let us help you.

Cross Roads Divorce Advisors provides comprehensive post-divorce transition management services for our clients and can assist you with the transfer of IRA accounts pursuant to divorce settlements. Let us know if we can help in any way.

 

This information is not intended to be a substitute for individualized legal advice. Please consult your legal advisor regarding your specific situation.

 

Lou Falvo is a Certified Divorce Financial Analyst® and CIMA® (Certified Investment Management Analyst) who assists clients by evaluating the tax and financial aspects of divorce. Lou is dedicated to reducing the burden of each client by thoroughly examining the financial elements of the client’s divorce, with a keen focus on what is in his or her best interests. Contact Lou to find out how he can assist you with your divorce proceedings at  lfalvo@crossroadsdivorce.com or (585) 542-2382.