Can my IRA assets be awarded to my ex-spouse in divorce proceedings?
Yes. IRA assets can be awarded to an ex-spouse in a divorce settlement.
Can IRA assets be awarded as part of a legal separation agreement?
Yes. In addition to being awarded in divorce proceedings, IRA assets also may be awarded to a spouse in the case of a legal separation.
What happens with IRA assets that are awarded to a former spouse in divorce proceedings?
Typically, IRA assets that are awarded to a former spouse in divorce proceedings can be distributed to the former spouse or may be transferred to an IRA established in the name of the former spouse. Also, the assets may be distributed to the former spouse, who may subsequently roll over the assets to her IRA. For a former spouse to be given these options, the divorce decree or legal separation document clearly must award ownership of the IRA assets to the former spouse.
Are IRA assets that are transferred to a former spouse’s IRA typically taxed at the time of the transfer?
No. IRA assets generally are not taxed at the time they are transferred to the former spouse’s IRA, provided the transfer is made in accordance with a court-issued divorce decree or separation agreement.
Are IRA assets received in a divorce settlement exempt from the 10 percent early distribution penalty tax if distributed to the former spouse?
No. There is no 10 percent early distribution penalty tax exception for divorce or legal separation. Once the awarded IRA assets have been transferred to an IRA in the former spouse’s name, the assets typically are subject to the normal IRA rules governing distributions, taxation, and penalties.