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Considerations for splitting an IRA among divorcing couples.

In Maricopa County and around the country, there has been an alarming increase in the number of divorces in couples over 50. Often referred to as grey divorces, these marital splits have brought about new challenges regarding the division of assets. One example is dividing an IRA.

Traditionally, splitting an IRA is relatively common and not difficult to do. However, when divorcing couples are close to the 72(t) requirement to take a distribution, things become more complicated. One area which seems to present the greatest difficulty is if one or more spouses has elected to take draws from the IRA before reaching the age of 59 and 1/2 by utilizing monthly payments allowed under the 72(t) provision. This could be due to a need for increased cash or some other financial hardship. If an IRA account that is paying monthly payments becomes one of the assets that is to be split in the divorce, it is often very complex to reach an advantageous division for both spouses.

Furthermore, the IRS offers little instruction to aid advisors on the tax implications of the split for both immediate and future years. For this reason, it is imperative that advisors be as educated as possible on the way IRA splits can affect divorcing couples.

There has been some progress in advice for clients through private letter rulings. While none of these rulings are considered official or formal, previous IRS decisions on similar cases presented have fallen in line with several of these rulings giving them credence.

For those older adults who are seeking divorce, there can be many unforeseen financial implications that can cause issues for years to come. It is a good idea to consider seeking the advice of an experienced divorce attorney who can offer advice and guidance on issues such as child support and property division.

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