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Inherited IRAs can be split during a divorce

On Behalf of | Jul 17, 2018 | Divorce

The federal tax code and various laws regulate how certain assets are divided during a divorce. However, there are no clear rules regarding inherited IRAs. Despite the absence of any legal guidelines, inherited IRAs are being divided up in family courts in Maryland and across America. With new alimony rules coming into place at the beginning of 2019, these retirement accounts may play an even bigger role during divorce in the future.

When an inherited IRA gets divided, it retains its inherited status and the minimum distribution schedule stays the same. The only significant change is the adding of the new beneficiary. Each spouse in this case will be responsible for future RMDs based on the percentage they keep. This commonly happens when the owner of the IRA decides to use their inherited account to satisfy the agreed property split.

Whether or not an inherited IRA is eligible for division during a divorce usually depends on its designation as a marital or separate asset. Since these types of IRAs cannot be owned jointly or receive additional contributions, many experts believe they are clearly separate assets. Until official rulings or laws are in place, however, family courts may decide differently.

Ex-spouses who are trying to decide whether splitting an inherited IRA is in their best interests could benefit from legal guidance. A lawyer will have knowledge about state laws and recent decisions made in local family courts, and they can use this knowledge to advocate on the behalf of their client during divorce negotiations and arguments. A lawyer could also provide advice regarding tax issues related to dividing retirement IRAs.

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