In Florida, individuals are required to disclose their marital assets and work out an equitable division of this property. Generally, these assets include items like real property, motor vehicles, furniture and cash. In these situations, dividing property is relatively easy and both former spouses can receive their fair share.
One type of asset can be more challenging to divide, however. When spouses place their savings in an Individual Retirement Account (IRA), they must work out exactly how they will divide the account, from both a financial and process standpoint.
Multiple factors at play
IRA accounts are meant to allow people to save for their future. They are unlike traditional bank accounts and are subject to unique tax laws. Thus, to divide them in a divorce, the couple must consider both divorce laws and tax laws.
In many cases, the divorcing couple will agree to an equal split of an IRA account. Whatever split they do decide on, they must then submit the agreement to the court and obtain an order that formalizes the terms. The order must not only state how much each spouse will receive, but also the manner in which the account will be divided.
There are a few ways to divide an IRA account, but the most common is a direct transfer. This means that the IRA owner spouse directs the trustee to transfer the appropriate funds to the trustee of a separate IRA. Once this is done, each spouse will be in control of his or her portion of the original account balance. The IRS generally allows these transfers to pass tax-free when they are done in conjunction with a divorce.
Dividing assets in a divorce can be a challenge, whether or not an IRA is involved. If you are about to go through a divorce in Florida, consult a dedicated family law attorney to protect your rights and best interests.
Attorney Andrea Jevic also contributed to this blog post.