Dividing IRAs in DivorceDividing IRAs in Divorce
Avoid adverse and unexpected tax consequences.
May 18, 2018
When representing a client going through a divorce, you must settle a number of differing property issues. Of particular concern are the special rules governing individual retirement accounts. The recent Tax Court memorandum decision in Kirkpatrick1 (discussed below) is a reminder that if the transfer of an IRA isn’t properly handled in relation to the divorce, it can lead to adverse, and likely unexpected, tax consequences.
The Rules
The Internal Revenue Code provides that the transfer of an individual’s interest in a qualified plan or IRA to his spouse or former spouse under a “divorce or separation instrument” isn’t a taxable transfer. Specifically, in relation to IRAs, IRC Section 408(d)(6) states that the transfer of an individual’s ...
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