IRA’s in a Divorce
I have a husband & wife (ex-wfie). She gets a small partion of His IRA. What are the tax implications if she wants to take a distribution ? (And should she take it from her IRA after the funds are transferred. I some what remember that the 10% IRS penalty is waived for divorces / divorce decrees / QDROs, but was wondering if that was for only 401(k)’s / 403b’s, etc ?. Also, is this written about in any past newsletters ?
Thank You,
Matt Strajack
Permalink Submitted by Alan Spross on Thu, 2007-08-30 20:34
Matt,
Unfortuneately, the penalty exception for QDROs does not apply to IRA accounts. Therefore, the transfer of funds into her account will not change the tax treatment of distributions regardless of when she takes them. Of course, a 72t plan could be established if overall conditions dictate the need for on going distributions from her IRA. The settlement should also have dealt with any basis in the ex’s IRA that should also transfer to her, and if so, each spouse needs to file an 8606 to amend the amounts of basis in the remaining accounts. Sorry, don’t know about newsletter articles.