Division of IRAs

(Individual Retirement Accounts / Individual Retirement Annuities)

If your case may require the division of an IRA, before contacting PASA, Inc., please explore the options available through the financial advisor associated with the IRA or the custodian company.

You can start the process for an IRA Transfer Incident to Divorce by submitting the separation agreement / divorce decree to the IRA custodian or advisor to see if anything additional is needed. It is likely the IRA custodian may accept the full separation agreement / divorce decree along with a simple Transfer Form specific to their company.

IRAs are not qualified plans under ERISA, and therefore QDROs do not apply. It has been our experience that IRA custodians may—or may not—require a DRO (a similar document), depending on several factors, including their policies, the IRA type, and the exact wording of the parties’ separation agreement or divorce decree.

Please note most IRA custodians will only accept a percentage, dollar amount, or number of shares as of the date of transfer; most will not calculate gain/loss on an assignment as of a specific past valuation date.

Note for recipients: While an IRA Transfer Incident to Divorce should not be a taxable event, if you decide to take a distribution from an IRA, the exception to the IRS 10% early withdrawal penalty does not apply to IRAs. If you are under 59½, an IRA distribution may be included in your taxable income and may be subject to a 10% early withdrawal penalty (IRA FAQs - Distributions). We are not tax experts, and suggest consulting a tax expert for a better understanding of the tax consequences.