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URL:  http://boards.fool.com/my-question-is-regarding-an-ira-that-my-son-had-19179507.aspx

Subject:  Re: IRA and divorce ? Date:  6/12/2003  4:38 PM
Author:  pmarti Number:  65811 of 121571

My question is regarding an IRA that my son had converted from former employer's 401k. The lawyer recommends that IRA be split, 55% to DIL and 10% to our preschool grandson. I'm not sure of the exact details but I believe the suggestion is to close the IRA and distribute funds. Divorce or not this will incur tax and penalties, true? Would there be any added implications that I should alert my son about?

For starters, I suggest you get a copy of IRS Publication 590, turn to page 25, and whack your son over the head with it until he gets a lawyer.

IRA assets can be transferred in divorce from one spouse to the other without tax or penalty. This means from your son's IRA to his wife's IRA. If your son does what the lawyer wants him to do, your son is responsible for income tax on the entire amount withdrawn plus 10% of the withdrawal amount for the premature distribution penalty. There are no provisions for any kind of tax-free transfer of IRA assets to a child.

Phil
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