Inherited IRA transfer to spouse according to divorce decree
Wife Jane inherited IRA from Mother. Mother was taking RMD’s. Jane and Ken are got a divorce and the inherited IRA is to go to Ken as part of the settlement. Ken will continue to take the RMD’s as necessary. The issue is that we do NOT want to create a taxable event when the Inherited IRA goes to Ken. First can this be done and secondly does the court order prevail in this case.
Permalink Submitted by Alan - IRA critic on Tue, 2021-04-20 17:43
Yes, an IRA or inherited IRA can be split under a court order under Sec 408(d)(6) (transfer incident to divorce). Such a transfer is not a distribution and not reported on a 1099R. The court order must be provided to the IRA custodian, who then transfers and retitles the inherited IRA to Ken. Of course, the RMDs depend on whether Mother passed after 2019 (Secure Act) or before, and are unaffected by the transfer. By all means, Jane should avoid taking any distributions from the inherited IRA after the award. Note that if mother’s year of death RMD was not completed (none if she passed in 2020), that remains an obligation for Ken.