Roth IRA And Divorce
Roth IRA Being Split In Divorce:
Is the 5 year clock the same as in the death of the spouse beneficiary, the account established the earliest ?
Are the assets pro rated between principal and earnings when allocated?
How does the “qualified distribution” status apply if one of the parties has met the criteria but the other has not?
Permalink Submitted by Alan Spross on Tue, 2009-04-07 01:42
I am not aware of any specific rulings, but 408(d)(6) applies to Roth IRAs and well as traditional IRAs. Therefore, the transfer of interest to a spouse in a divorce action would also transfer a proportionate amount of basis, and the benefit of the first contribution year. None of the survivorship rules apply here since there is no death of an IRA owner, just a partial transfer of interest in the Roth.
Therefore, the spouse receiving an IRA transfer would have the same initial year determining the holding period, and would receive 50% of the regular contribution and conversion contribution balance. If there are earnings, they would also receive 50% of the earnings. It would be necessary to determine these numbers as of the effective date of the transfer.