Individual Retirement Accounts (IRAs) have been around for more than 40 years now, and they serve as a retirement savings option for many investors. With so many utilizing IRAs for so many years, the next generation of IRA investors is up and coming. Those investors are ones who have inherited or will inherit an IRA from a parent, spouse, or someone else. These inherited IRAs are experiencing an additional step in their evolution, however, as they begin to play a bigger role in divorce settlements.
Can Inherited IRAs Be Split in a Divorce?
As it stands, there is no official ruling in the tax code or regulations that distinctly states whether an inherited IRA can be split tax-free in a divorce. Despite a lack of regulations, this is exactly what is happening in divorce courts across the country. When an inherited IRA gets split, the IRA retains its inherited status. The minimum distribution schedule also remains the same, and the decedent’s name stays on the account. The new beneficiary’s name will then be added.
An inherited IRA may be split in a divorce when one spouse wants to use part of their inherited IRA to satisfy an agreed-upon division of property. It is usually part of the divorce agreement, and it typically includes confirmation that each spouse is responsible for any future required minimum distributions.
One interesting aspect of inherited IRAs being split in divorce proceedings is that IRAs cannot be owned jointly and cannot receive new contributions. These features tend to coincide with property that would be considered separate in a divorce. But laws vary from state to state, making it so that inherited IRAs are treated differently. Consulting an experienced divorce attorney can help you determine if this is something you can do in your divorce, especially when it comes to division of property and debt.
Scottsdale Divorce Attorney Can Help You with Division of Property Questions
You should contact the Law Office of Karen A. Schoenau for help with your divorce proceedings in Arizona. Karen Schoenau has years of experience representing clients in divorce cases in Scottsdale and throughout Arizona, and she possesses in-depth knowledge of divorce law. She handles all types of divorce matters, from divorce reached by agreement to uncontested divorces. All you have to do is call (480) 725-1438 or fill out the online contact form to begin discussing your divorce options today. The law firm’s office is located at 14301 N. 87th Street #211, Scottsdale, AZ 85260.
The articles on this blog are for informative purposes only and are no substitute for legal advice or an attorney-client relationship. If you are seeking legal advice, please contact our law firm directly.