Can a 72t be split for divorce?
Clients under age 59 1/2 getting divorced. Husband has a 72t running for another 3 years plus all remaining IRA assets are in his name. Can the 72t be split, or should the divorce settlement allow for sharing the income?
Permalink Submitted by Alan Spross on Wed, 2008-05-28 00:36
The only way to be sure that the SEPP will not be busted is to continue the current distributions until the end of the plan, meaning that the husband would have to report the distributions and then transfer an agree portion to the ex. If he pays the taxes, it would be equitable for the decree to be adjusted for the tax status of the settlement.
You would expect that maintaining two households would result in the current distributed amount to be inadequate and if the IRA must be tapped for extra funds, the plan would be busted. Since the IRS has released conflicting PLRs on the effect of divorce on SEPPs over the years, the only sure way is to keep the current plan unaffected until the modification date is reached.
If the decree partitioned the account and each party continued to withdraw their half of the SEPP amount and claimed the exception on Form 5329, they might luck out, but that is not very reassuring.