To avoid unnecessary delays in the transfer of IRA funds: (Qualified distributions from Roth IRAs are tax-free). However, 20% of that distribution will be withheld for taxes (as an offset to future income tax liability).ĭon’t forget that although IRA-to-IRA transfers are tax free, you will be taxed when you withdraw funds from your account. If you receive a distribution from an IRA as part of your divorce settlement, rather than an IRA-to-IRA transfer, you will have 60 days to reinvest or “rollover” that distribution to your own IRA. The funds are transferred directly from one spouse’s IRA to the other spouse’s IRA.ĭividing or transferring IRA funds without following these rules could mean that the IRA holder will owe federal income taxes plus a 10% penalty on the transferred amount.The IRA transfer is provided for in your divorce decree or property settlement agreement, AND. However, women should be aware of the tax consequences and potential delays involved in the transfer of IRA funds when negotiating their divorce settlement.įederal law allows tax-free transfers if BOTH statements below are true: When a couple divorces, Individual Retirement Accounts may be divided by a regular court order or judgment.
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