Early in the process; wife has a lawyer that supposedly specializes in amicable divorces and we are (were?) hopeful that we might be able to do it with just one lawyer, but I have some real concerns about the suggestion about how to deal with IRAs.
There are two IRAs in question, both traditional (pre-tax). One is in an annuity. She has a matching one with a smaller balance with the same company. I was expecting to just transfer some of mine.
The other IRA is an investment account. I was expecting her to open a matching one and then have half the balance transferred.
Discussion with FA and quick searching indicates this is done pretty easily with a separation agreement or divorce decree. The custodian just transfers it.
Her lawyer is saying it can be expensive and complicated and suggested I retain ownership with some agreement to provide funds. It sounds like a tax problem for me and lacks closure. Is there really something complicated about this?
IRAs usually need domestic relations orders to divide them and have a portion transferred tax-free to the other spouse. The key is that they are divided and transferred tax-free incident to divorce.
If an IRA is being divided exactly in half, sometimes a domestic relations order is not needed and a simple IRA transfer order can be done. Your financial advisor would know best on the specifics.
Anna Ayscue
Attorney with Rosen Law Firm Cary • Chapel Hill • Durham • Raleigh • Wake Forest
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