IRA Transfer under a Divorce Decree

Submitted by John Nielsen on Tue, 2022-11-29 22:42

I have a client who is now legally divorced and under the divorce decree his ex-spouse is entitled to $200,000 from his Traditional IRA. For this to be a non-taxable transaction for the ex-spouse who is receiving the proceeds, do the funds have to be directly transferred by my custodian (who holds my client’s IRA), to her custodian, or can my custodian issue a check directly to her, and she can then turn around and deposit the funds into her Traditional IRA using the 60 day rollover rule.



Submitted by David Mertz on Tue, 2022-11-29 23:17

  • This is *not* permitted to be done by distribution and 60-day rollover.  It must be done by non-reportable trustee-to-trustee transfer.  The payment from the original IRA must be made to Financial Institution FBO the IRA of the ex-spouse, not to the ex-spouse.
  • If the client instead has a distribution paid to the ex-spouse, the client is stuck with the tax consequences and the ex-spouse cannot put the $200,000 into an IRA.

Submitted by Alan - IRA critic on Tue, 2022-11-29 23:19

  • This must be done by direct trustee transfer only. A distribution check cannot be rolled over to her IRA and would be taxable to client and subject to the 10% penalty if under age 59.5. If client already received a distribution check, hopefully he has a rollover available, and if so he could roll it back to his own IRA, then begin the transfer  process. A certified copy of the divorce decree must be provided to client’s custodian and a form completed similar to the following Fidelity form. Ex must have or open her own IRA to receive the transfer. More detail provided in the following:
  • content (fidelity.com)

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