IRA in divorce settlement–titling issues?
I have searched here and can see that you don’t need QDROs for IRAs, but that you do need the division of the IRA written into the divorce decree in order to make a transfer from one spouse to another without triggering a distribution.
Is simply making a trustee-to-trustee transfer into the spouse’s already-existing IRA rollover account acceptable, or should it be a new IRA account? Are there any titling issues like there would be with an inheritance situation?
Thank you.
Permalink Submitted by Alan Spross on Tue, 2009-12-15 00:48
No, it could go into an existing owned TIRA account and totally loses it’s identity as to source. If there was any basis received with the transfer per the settlement, an 8606 needs to be filed to report the added basis. If the settlement does not address basis, I suppose it could be pro rated at the same percentage as the total balance transferred.
If there is any contingency in the settlement under which the proceeds would be forfeited back (and I do not know if that possibility even exists), then it should be kept in a separate IRA account. It also should not be commingled with a rollover IRA of the receiving spouse, as that could cause a restriction in the ability to transfer the IRA into an employer’s plan in the future, since some qualifiled plans will only accept rollover or conduit IRAs.