Permalink Submitted by Alan Spross on Thu, 2012-02-02 23:13
No.
The transfer incident to divorce provisions are the ONLY way an IRA account ownership can be changed without the death of the owner. There have also been tax court decisions invalidating the transfer of an IRA as a result of a sham divorce designed for the main purpose of accomplishing the transfer of IRA ownership.
Even if the IRA were transferred to the owner’s qualified retirement plan, the same basic provisions would apply to a QDRO secured by the other spouse.
I suppose the IRA could distribute the IRA as a taxable distribution and use the proceeds to fund IRA contributions for the other spouse or enhanced retirement plan contributions that could eventually be rolled to the other spouse’s IRA. But these would be taxable and subject to penalty, so it would not be cost efficient at all.
Note that if creditor concerns prompted your question, IRA accounts do have excellent creditor protection in most states, but not all.
Permalink Submitted by Alan Spross on Thu, 2012-02-02 23:13
No.
The transfer incident to divorce provisions are the ONLY way an IRA account ownership can be changed without the death of the owner. There have also been tax court decisions invalidating the transfer of an IRA as a result of a sham divorce designed for the main purpose of accomplishing the transfer of IRA ownership.
Even if the IRA were transferred to the owner’s qualified retirement plan, the same basic provisions would apply to a QDRO secured by the other spouse.
I suppose the IRA could distribute the IRA as a taxable distribution and use the proceeds to fund IRA contributions for the other spouse or enhanced retirement plan contributions that could eventually be rolled to the other spouse’s IRA. But these would be taxable and subject to penalty, so it would not be cost efficient at all.
Note that if creditor concerns prompted your question, IRA accounts do have excellent creditor protection in most states, but not all.
Permalink Submitted by Bruce Steiner on Fri, 2012-02-03 02:49
I’m not aware of any case involving a QDRO outside the context of a divorce, but is there any requirement that a QDRO be connected to a divorce?
Of course, if portability is made permanent, this issue will be less important going forward.