Partition agreements and QDRO
I have a client who is having a partition agreement drawn up in lieu of a divorce. He wants to know if a QDRO is necessary for the IRA money and if one can be used as he and his wife want to partition their IRA money.
I have a client who is having a partition agreement drawn up in lieu of a divorce. He wants to know if a QDRO is necessary for the IRA money and if one can be used as he and his wife want to partition their IRA money.
Permalink Submitted by Alan Spross on Mon, 2011-06-27 17:31
A QDRO is only required to split a qualified retirement plan, not an IRA.
Splitting an IRA between spouses can only be done by a divorce or separate maintenance decree, or written document related to such a decree. A divorce attorney can draft such a document and it will cost much less than pursuing a QDRO.
Note that the QDRO exception to early withdrawal penalties does NOT apply to IRA accounts, so a transferred portion of an IRA will be subject to such penalty in the same manner as if the receiving spouse owned the IRA all along. The other IRA penalty exceptions do apply including distributions under a 72t (SEPP) plan.
If the original IRA contains any basis from non deductible contributions, the transfer document should address how the basis is to be split. If silent on this, the basis should be assigned in proportion to the % of basis in the spouse’s total IRA accounts being transferred.
See Pub 590, p 28.