An IRA and other retirement money is often a concern during divorce. If you both have retirement accounts, you may feel less worried. However, women who haven’t worked outside the home in many years do not have their own retirement accounts and are understandably nervous about their financial future.
During our divorce workshops each month, we receive a lot of questions about IRAs and 401(k) accounts. For example, one attendee recently asked, “Does an IRA become joint property?”
The short answer is no. IRAs never become joint property. But during divorce, an IRA or a 401(k) may be considered marital property. The difference may seem like semantics to most of us, but the important thing to know is that those assets are on the table for both parties to divide.
Notes about Dividing IRAs
A few important things to know about dividing IRAs:
- Transferring the money from one IRA to another is tax-free, but only if done as a transfer and not a distribution. This must be part of your divorce decree.
- The transfer can be done in one of two ways: (a) Transfer a percentage or dollar amount of the owner’s IRA to the spouse’s IRA or (b) Set up a new IRA for the amount to be transferred.
- For an easier transfer, consider setting up your new IRA with the same institution as your spouse’s.
A Note About Your Financial Future
The Women’s Institute for Financial Education (WIFE) is the original creator of Second Saturday divorce workshops. As their motto says, “A man is not a financial plan.” It’s a good motto to remember if you have not worked outside the home. Alimony is not guaranteed. Once you divorce, you will probably have to find a job. And even if you do not have to work, you may want to anyway, so you can contribute a monthly amount to your new IRA.
To learn more about property distribution in a divorce, call us today or schedule a consultation with one of our professionals via chat on our website, or submitting a form.