Divorce Dex.com: Retirement Accounts

Definition Retirement Accounts - individual, professional, tax-sheltered or tax-deferred accounts such as IRAs, SEPs, Keoghs, ESOPs, 401(k)s, 403(b)s and 457s.

Application in Divorce The phrase retirement accounts is a general one referring money set aside in anticipation of the so-called "golden years."

In divorce actions, these accounts are subject to distribution.

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How are IRA accounts divided upon divorce?

There are two methods for transferring an IRA to a former spouse incident to a divorce.

1. By changing the name on the IRA. Use this method if the entire IRA is to be transferred from one spouse to the other. Thereafter, for all purposes, the former spouse is the owner of the IRA.

2. Direct transfer. The IRA account owner directs the IRA custodian or trustee to transfer a fixed dollar amount or a percentage of the owner’s IRA directly to the trustee or custodian of a new or existing traditional IRA established in the name of the former spouse.

In both situations, once the transfer is complete, the former spouse, i.e., the transferee spouse, is free to then make withdrawals from the IRA, subject to regular income taxation as well as the 10% penalty if the transferee spouse is younger than age 591/2.

Contributed on 2/14/2009 by: Law Offices of L.D. GorinPortland, OR[Total Submissions: 1]

Category: Retirement Accounts (Applicable in All States)

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Dividing Retirement Plans in Divorce

Deferred compensation refers to pension plans, 401K plans, IRAs and other retirement assets.Such plans are divisible as part of a property settlement in divorce regardless of which party is named on the plan. How they are divided depends on the value and nature of the asset. Perhaps one of the worst scenarios in a divorce is when retirement assets are transferred to a former spouse but the original owner is liable for liable for the taxes, including penalties for early withdrawal.

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