If you're going through a divorce, your Individual Retirement Account (IRA) assets may be subject to division. This article explains how IRA assets are divided, what legal documents are required, and what tax rules apply. Expand the sections below to learn more.
A married individual's retirement savings are generally considered a shared marital asset. If a couple divorces, they need to decide how to divide each marital asset — including IRA contributions made during the marriage. This means deciding whether to split the account between both spouses or allocate it to one of them.
If an IRA is included in the property settlement agreement, any transfer of IRA funds from one spouse to the other must be done under a legal separation agreement or divorce decree. This document must specifically state how much of the IRA should be transferred to the receiving spouse.
The spouse receiving the assets is responsible for paying any income tax due on future distributions from the account.
The transfer itself must be done as a non-reportable transfer, meaning the amount is not reported on either spouse's tax return or to the Internal Revenue Service (IRS). Any distribution taken after the transfer is reported to the receiving spouse and must be included in their income.
This information is for general education purposes only and is not intended to be tax advice. Consult a qualified tax or legal professional for guidance specific to your situation.