Dividing a retirement account during divorce is an exacting matter, with numerous pitfalls to avoid. Any failure to do so can result in a significant financial loss to one or both divorcing parties. Learn how to avoid the most common IRA division mistakes made during divorce, and discover how an experienced attorney can help with the process.
Dividing the IRA Before the Divorce is Final
IRAs, when disbursed, are considered taxable income by the Internal Revenue Service (IRS). Divorce does receive a special exclusion, so there are no penalties for either party. However, the split of an IRA account must be justified with a divorce decree. Without it, the division becomes subject to fees and penalties. That is not to say you cannot make an informal agreement with your spouse, or that you cannot discuss or determine how the account will be divided once the divorce has been finalized; such information can be sent to the courts for approval. Instead, it simply means that you cannot divide the IRA until you have a final decree.