My property division question is about how my IRA account will be divided.
We have agreed to splitting the amount with my receiving 100% of the value of the IRA at the time of our marriage and then splitting the contributions and earnings of the IRA after our marriage 50/50.
How do we word the judgment in order to accept these conditions to create two separate accounts without either of us incurring any tax liability on the division of the original account?
Since I am only licensed to practice law in Wisconsin, I can only provide a general answer to your IRA property division question.
You can structure the division of your IRA to avoid tax liability but you need to be careful with the execution. If any part of the account is liquidated, someone will incur tax consequences.
The easiest way to avoid taxes is to transfer the divided portion of the IRA into a new IRA set up for the alternate payee. Your IRA manager should have forms that effectuate such a transfer.
The key to this division is the language in your Marital Settlement Agreement. You need to specifically include provisions that indicate the divided funds will be put into a new IRA to avoid taxes.
You should also include language that expressly assigns the tax liability to the opposing party if she is going to liquidate this new account.
I recommend you at least have a family law attorney review your final marital settlement agreement to make sure all your bases are covered. If you would like more information on tax consequences, you must consult with a certified tax advisor.