Skip to main content

Any std settlement agreement text to ensure timely no-tax transfer of IRA, not months after divorce?Spouse will hold it hostage!

Bethesda, MD |

Many bad faith acts throughout extended settlement agreement negotiation means I have strong reason to distrust spouse to implement the agreed-upon equalization of IRA via a transfer to me.
Don't want to go to court post divorce.

1) Is there a way Schwab-held IRA funds can be transferred untaxed spouse-spouse after divorce agreement is signed BUT BEFORE decree of divorce? Title to foreign home will go to spouse, preferably prior to official divorce to avoid taxes there. OK w/ me but procedure could take many many months, so spouse may try to delay final court date, holding up IRA transfer. Any way around this?

2) Is there pro forma language included in agreements to tighten up the implementation of such transfers, a standard & specific period of time within which this is completed?

+ Read More

Attorney answers 3

Posted

There is a way to do this transfer without using a QDRO, which is the thing that makes it take months. Its known as a "transfer incident to divorce." The IRAs own rules and language will decide if taxes are taken, but in my experience all IRAs will consider this a transfer or rollover and the recipient (you) with have to pay tax on it but he will not and there will be no withdrawal penalty. This saves a good bit of money, but it assumes you do the transfer language correctly. And frankly, you should have an attorney for all of this to make sure it all goes right

Asker

Posted

Thank you for such a fast response! Yet my questions are on timing: 1) can the rollover occur before the uncontested divorce hearing occurs? And if not, do I have to depend on my spouse to contact Schwab and initiate the transfer (which he could really drag his feet on), or can the transfer be required within a specific timeframe, or actually be initiated by me by providing Schwab the documents?

Jeffrey B Henry

Jeffrey B Henry

Posted

Essentially in this situation, you can agree to most anything, including what you are asking here. And if he follows through, great obviously, it can be done anytime. It will require his involvement as the account is his in his name. Typically, a separation agreement may be incorporated into a consent order before the final divorce, but it is often done at the final divorce when the divorce decree incorporates it. Thus the agreement is not enforceable if he drags his feet until the final order is signed because the agreement is not enforceable until it is adopted by an order. That said, if the agreement is incorporated into a consent order prior to the final divorce, it is enforceable (its just not very common). I would also consider if you get close to that point where it may be happening, you may want to consult a tax professional to make sure the tax implications are optimized. My impression is the taxes/penalties that are assessed can be more if the distribution is before the final divorce, as opposed to waiting for the final divorce. Then again the tax implications could be relatively minor and you might say oh heck I'll pay that, who cares, gimme my cash.

Asker

Posted

Thanks very much. This is very helpful!

Jeffrey B Henry

Jeffrey B Henry

Posted

Have a drink in my honor when you get the cash! LOL you are welcome

Posted

I agree with Jeff, and suggest you have an attorney assist you with this.

This is NOT legal advice, is GENERAL INFORMATION ONLY, and does NOT establish an Attorney/Client Relationship with you. Therefore my answer cannot address your specific legal situation and you should not rely upon my answer in your legal matter.

Posted

Your questions are very specifically related to your case. Any left out facts could change an answer/explanation. Although I agree with counsel's comments, my caveat to you is that this likely involves a large amount of money, and so you do well to make sure an attorney and a tax professional counsel you prior to making any decisions in this case. Legal advice is not given out here on AVVO because we do not get all the facts, nor do we get to review the relevant legal documents. So the way to obtain legal advice is through a consultation.

This is NOT legal advice, is GENERAL INFORMATION ONLY, and does NOT establish an Attorney/Client Relationship with you. Therefore my answer cannot address your specific legal situation and you should not rely upon my answer in your legal matter. I am an attorney licensed in Maryland and California.

Avvo divorce email series

Sign up to receive a 10-part series of useful information and legal advice about the divorce process.

Can't find what you're looking for?

Post a free question on our public forum.

Ask a Question

- or -

Search for lawyers by reviews and ratings.

Find a Lawyer