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Bill
Bill, Enrolled Agent
Category: Tax
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Experience:  EA, CEBS - 35 years experience providing financial advice
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Is a QDRO required for the division of a Rollover IRA in a

Customer Question

Is a QDRO required for the division of a Rollover IRA in a divorce?
Submitted: 5 years ago.
Category: Tax
Expert:  Tax.appeal.168 replied 5 years ago.
Hello, THANK YOU for choosing Just Answer. My goal is to help make your life...a little...LESS taxing.

In brief, the answer to your question is no, refer to paragraph 3.

What is a Domestic Relations Order?

A domestic relations order is a judgment, decree, or order (including the approval of a property settlement) that is made pursuant to state domestic relations law (including community property law) and that relates to the provision of child support, alimony payments, or marital property rights for the benefit of a spouse, former spouse, child, or other dependent of a participant.

A state authority, generally a court, must actually issue a judgment, order, or decree or otherwise formally approve a property settlement agreement before it can be a domestic relations order under ERISA. The mere fact that a property settlement is agreed to and signed by the parties will not, in and of itself, cause the agreement to be a domestic relations order.

There is no requirement that both parties to a marital proceeding sign or otherwise endorse or approve an order. It is also not necessary that the retirement plan be brought into state court or made a party to a domestic relations proceeding for an order issued in that proceeding to be a domestic relations order or a qualified domestic relations order. Indeed, because state law is generally preempted to the extent that it relates to retirement plans, the Department takes the position that retirement plans cannot be joined as a party in a domestic relations proceeding pursuant to state law. Moreover, retirement plans are neither permitted nor required to follow the terms of domestic relations orders purporting to assign retirement benefits unless they are QDROs.
Customer: replied 5 years ago.
I know all of that. I have prepared QDRO's for years, and to my knowledge all IRA's with the exception of Roth IRA's required a QDRO for division. I talked to the administrator of the IRA, a staff member with Fidelity Investments, who said that a QDRO was not necessary for this particular IRA, a "Rollover IRA." Is that true?
Expert:  Tax.appeal.168 replied 5 years ago.
Hello again,

It appears that the answer to your question is no, a QDRO is not necessary for a Roth IRA.


Although a QDRO is not necessary to divide a Roth IRA upon divorce, it is suggested that you get appropriate tax advice before any distribution is made from an IRA as the tax consequences may be significant.

http://www.qdromasters.com/individual_retirement_account_ira.html
Customer: replied 5 years ago.
The question was NOT about a Roth IRA! The question is this: Is a QDRO required for the division in a divorce of a "Rollover IRA?"
Expert:  Tax.appeal.168 replied 5 years ago.
My perception of the the question was that you were asking about the Roth IRA. My apologies. However, at this point, I will release the question and allow another expert to answer your question.
Expert:  Tax.appeal.168 replied 5 years ago.
System is not letting me release question...trying again. No action required on your part.

Thank you.
Customer: replied 5 years ago.
I still do not have the answer!
Expert:  Tax.appeal.168 replied 5 years ago.
I opted out which means that I released the question for another expert to answer. Your question is now back in the question que for another expert to answer if they choose to.
Expert:  Bill replied 5 years ago.

QDROs only apply to qualified plans not IRAs. Hence, a QDRO is not necessary to divide the assets in an IRA between spouses. However, if an IRA is to be transferred to another spouse and be taxable to that recipient spouse, then it must be through a divorce or maintenance decree or other written document.

See page 28 - http://www.irs.gov/pub/irs-pdf/p590.pdf

 

http://www.expertlaw.com/library/family_law/qdro.html#IRA

Bill, Enrolled Agent
Category: Tax
Satisfied Customers: 3153
Experience: EA, CEBS - 35 years experience providing financial advice
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