When you and your spouse are preparing for the property division phase of your Florida divorce, the inventory of your retirement accounts may have you feeling a little nervous. You may feel that it would be better to trade other assets in order to keep accounts intact and avoid penalties, and in some cases, that may be the way to go if you and your spouse can agree.
But different types of retirement accounts have different rules for how they can be divided in divorce. While some of them incur penalties, fortunately, your IRA does not.
According to the Entrust Group, the IRS will allow you to take certain actions with your IRA withoutpenalizing or taxing you for them. These both involve transfers:
• Transfer Incident to Divorce: This is a direct transfer. Through a domestic relations order from the court, your former spouse may make a request to the financial institution to have the funds transferred to his or her name.
• Renaming: Instead of your former spouse requesting a transfer, you create a new account and change the name on the original account to your ex’s. Then you transfer the amount of the funds that you are keeping to the new account. If your divorce settlement states that the entire account will become your former spouse’s property, then all you have to do is change the name from yours to his or hers.
Because your situation is unique, there may be some aspects that would make one of these division methods less advantageous. Therefore, this general information should not be interpreted as legal advice.