Equitable Distribution: How to Divide My IRA?

In a divorce proceeding, the court will divide the parties’ marital property and debts in a process called “equitable distribution.”  The court starts with the presumption that property should be divided equally, but it may adjust the distribution based on various factors including (i) the relative economic circumstances of the parties, (ii) any interruption of personal careers or educational opportunities, and (iii) the intentional waste or destruction of assets.

Retirement accounts require special attention during the equitable distribution process.  George Saenz at Fox Business News discusses this:

Not only are you getting separated from your spouse, but also your money. An individual retirement account, or IRA, belongs to the spouse that established it. You generally cannot transfer money from one spouse’s IRA to the other spouse’s account. An exception exists in the case of a divorce.

The transfer of all or part of your interest in a traditional IRA to your spouse or former spouse, under a decree of divorce or separate maintenance or a written instrument incident to the decree, is not considered a taxable transfer. As long as the receiving spouse maintains the funds in the IRA, neither spouse will pay income tax or penalty for early withdrawal.

There are two commonly used methods of transferring IRA assets to a spouse or former spouse. The methods are:

* Changing the name on the IRA.

* Making a direct transfer of IRA assets.

If all the IRA assets are to be transferred, you can make the transfer by changing the name on the IRA from your name to the name of your spouse or former spouse.

With a direct transfer, you direct the trustee of the traditional IRA to transfer the settlement amount directly to the trustee of a new or existing traditional IRA set up in the name of your spouse or former spouse.

Similar nontaxable treatment applies to your interest in employer-sponsored retirement plans transferred incident to divorce.

You would not make the withdrawals prior to the divorce. This would be taxable, and [if] you’re under age 59½ they would be subject to the 10% penalty for early withdrawals.

In Florida, these transfers are accomplished via a Qualified Domestic Relations Order, or QDRO.

If you have questions regarding equitable distribution and wish to schedule a consultation with a matrimonial lawyer in Tampa Bay, call The Law Firm of Adam B. Cordover, P.A., at (813) 443-0615 or submit your contact information.

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About Adam B. Cordover, Attorney-at-Law

Family Diplomacy is dedicated to helping clients restructure their families privately and respectfully. We practice exclusively in out-of-court dispute resolution, with a focus on collaborative divorce and family law, mediation, direct negotiations, and unbundled legal services. We maintain this out-of-court practice because we strongly believe that family disputes should be resolved in a private conference room, not in a hostile and public courtroom environment. This unique perspective on family law stems back to Adam B. Cordover’s experience studying International Affairs in Washington, D.C., and abroad. Adam had the rare opportunity to work closely with ambassadors and diplomats from war-torn regions around the world. He traveled around the globe, learning from diplomatic leaders as they applied dispute resolution techniques to tackle seemingly impossible conflicts. It dawned on him: If these techniques can work in the complex world of International Relations, why not Domestic Relations and Family Law? This realization lead Adam to create an exclusively out-of-court practice and to bring a more peacemaking approach to family law. In his previous role as a litigation attorney, Adam witnessed parties experience the negative emotional and financial effects that long, drawn out divorce battles can have on families. As a result, Adam has become a strong proponent of the Collaborative Process, where a structure is put in place so that life’s hardest moments do not have to be any more difficult than necessary. A thought leader in the international collaborative law community, Adam successfully spearheaded an effort of the Thirteenth Judicial Circuit to draft an administrative order safeguarding the principles of collaborative family law (just the fourth such administrative order in Florida). Adam has been featured in or interviewed about collaborative practice by the Tampa Bay Times, Tampa Tribune, Orlando Sentinel, Miami Herald, Tampa Bay Business Journal, Florida Bar News, NBC, Fox 13, Bay News 9, ABC Action News, The World of Collaborative Practice Magazine, and Spirit FM 90.5. Adam regularly speaks at professional and civic organizations locally and internationally regarding the collaborative process. Adam B. Cordover is president of Next Generation Divorce, a 501(c)(3) and Florida’s largest interdisciplinary collaborative practice group with member attorneys, mental health professionals, and financial professionals throughout Hillsborough, Pinellas, Pasco, Sarasota, and Manatee Counties. Adam is also on the Executive Board and co-chair of the Research Committee of the Collaborative Family Law Council of Florida. Further, Adam is a graduate of the inaugural class of the Leadership Academy of the International Academy of Collaborative Professionals. You can learn more about us and our services at www.FamilyDiplomacy.com. Attorney Adam B. Cordover is admitted to the Florida Bar and the United States District Court, Middle District of Florida. His office is located at 412 East Madison Street, Suite 824, Tampa, Florida 33602.
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