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Spousal support is deductible and taxable to your spouse. For the life insurance, No it is not deductible unless it is specifically designated as alimony. When one spouse transfers an individual retirement account (IRA) or a portion of an IRA to a spouse or former spouse under a divorce decree or under a written instrument incident to a divorce, that transfer is not considered a distribution to the owner of the IRA. The Internal Revenue Service (IRS) has also ruled that entering into a post-nuptial agreement that provides for the distribution of an IRA in the event of a divorce is not treated as a distribution.
In any of these cases, the transferred IRA is considered to belong to the recipient spouse and not to the original owner. This means that the recipient is not required to take distributions from the IRA after he/she receives it even if the original owner spouse was taking distributions as part of a series of substantially equal periodic payments.
Any transfer of an IRA to an ex-spouse should be made after the divorce is final. If the account owner transfers part or all of an IRA before the divorce is final, he/she could be taxed on the distribution and possibly incur a 10-percent early-distribution penalty.
Although transfers incident to divorce are tax-free, a transfer cannot be incident to the divorce until after the divorce has taken place. After the divorce, the account owner should transfer an IRA in a timely manner. If a divorce decree does not address the division of an IRA, then a transfer to the ex-spouse will be considered a taxable distribution to the account owner if transferred more than one year after the date of divorce.
An IRA transfer should be done via direct transfer (trustee-to-trustee). If the account owner takes a distribution from the IRA in the form of a check to the ex-spouse, that account owner will be taxed on that distribution. Additionally, the recipient spouse will lose the ability to grow the funds tax deferred in an IRA account. Therefore, the distribution should never be in the form of a check payable to a person.
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