INHERITED IRA – CAN IT BE TRANSFERED IN A DIVORCE
can an inherited non-spouse ira be transferred to a beneficiary spouse in a divorce proceeding as part of a property settlement using a trustee to trustee transfer. The IRA would be titled as a beneficairy IRA in the name of the ex-spouse.
Permalink Submitted by Alan Spross on Fri, 2008-05-02 05:19
I have not heard of this being done, but it is unlikely that the IRS would have a problem as long as the re titling was done as you indicated. The IRS is mainly interested in getting the RMDs out under the RMD guidelines. The divorce counsel should be sure that there is no problem with state law in ordering the transfer since a non spouse inherited IRA is definitely not marital property or community property in a CP state by virtue of it’s inherited status.
RMDs would definitely have to continue according to the life expectancy of the original beneficiary, not that of the new beneficiary.
The transfer itself might involve some red tape with the IRA custodian as their legal Dept has not likely seen this one before and they are still responsible for issuing the proper 1099R and 5498 forms. Since there is also some undeterminable IRS risk, I assume proper settlement is not possible without involving this IRA.
Permalink Submitted by David Koch on Fri, 2008-05-02 14:47
I researched and could not find anything which allowed on did not allow the transfer. A major mutual fund company will allow the transfer to be done this way. Transferor want to do it this way since they are doing the RMD and ex spouse needs the monthly income and the current holder does not
Permalink Submitted by Alan Spross on Fri, 2008-05-02 19:30
I think the main hurdle is getting the IRA custodian to process the order, and apparently that has not been a problem here. Even though a court order is not binding on the IRS, at least the transferor should maintain written evidence of the court order to show that this was done pursuant to a legal order.