Transfer to Inherited IRA dur to Divorce
A non-spouse beneficiary has an inherited IRA. They are getting divorced and their divorce document includes the inherited IRA as an account that will be transferred to the ex-spouse. Is this possible? If so, would the ex-spouse open an inherited IRA in her name to receive the funds or a normal Traditional IRA? Would she still be required take life expectancy distributions? If so, based on whose life expectancy? The ex-husbands because he originally inherited the funds? Thanks!!!
-Mike Triana
Permalink Submitted by Alan - IRA critic on Wed, 2015-02-04 20:30
It is rare, but possible because Sec 408(d)(6) indicates that an individual’s interest in an IRA can be tranferred incident to divorce. The interest could be as beneficiary as well as owner. The inherited IRA would have to be re titled showing receiving spouse as beneficiary of ex spouse and receiving spouse would have to continue the same RMD schedule as ex spouse, which would be based on ex spouse’s age in the year following owner’s death and that divisor reduced by 1.0 each year thereafter. The receiving spouse cannot be treated as the owner of this IRA or use their own life expectancy.