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How are IRA’s handled in property division?

| Dec 14, 2016 | Property Division |

If you are planning on getting divorced in the near-future, it is a good time for both you and your soon-to-be ex-spouse to start itemizing your property and other assets. And if you have been part of the workforce for a number of years, you each may have been contributing to one or more retirement funds. It is possible that these funds have grown quite large and as such, you need to be very clear on the manner in which they should be handled for division purposes.

For example, if the division process calls for transferring money from an IRA fund belonging to one spouse into the IRA account of the other spouse, it is necessary to treat the transfer as being “incident to divorce.” Failure to classify the transfer as “incident to divorce” could lead to both parties being hit with early withdrawal penalties.

Further, this transfer must occur within one year of the time the divorce is settled. Transfers that take place past the one-year threshold are subject to possible IRS review. Once a transfer is completed, the party receiving the funds is responsible for investment and distribution decisions.

Property division involving high-value assets, such as large retirement funds, can be extremely complex. Valuation of property, tax issues, and even personal emotions can all affect the final settlement. So, if you want to protect your interests and receive an appropriate settlement, it is a good idea to solicit the help of an experienced property division attorney. An attorney can clarify all of the laws pertaining to your division in an effort to maximize your share.