Message Font: Serif | Sans-Serif
No. of Recommendations: 9
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 If your son does what the lawyer wants him to do, your son is responsible for income tax on the entire amount withdrawn plus 10% of the withdrawal amount for the premature distribution penalty.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.

Print the post  


In accordance with IRS Circular 230, you cannot use the contents of any post on The Motley Fool's message boards to avoid tax-related penalties under the Internal Revenue Code or applicable state or local tax law provisions.
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and Glassdoor #1 Company to Work For 2015! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.