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IRA transfer timing for divorce
Old 06-19-2015, 12:59 PM   #1
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IRA transfer timing for divorce

Hoping for some insight from people that may have gone through this. Not looking for official lawyerly info, just "this is how it went for me".

Wife and I are divorcing. It's amicable. We are in California. We filed in Feb, got the (Granted) Judgement in May and the actual divorce date is in August. Did the whole thing through an office that helps file the paperwork correctly but isn't a law office.

Part of the agreement is for me transfer part of my IRA, Roth and Mutual Fund accts to hers. Here's my question: Should I do this before the August divorce date or after? Talked to Vanguard and they couldn't/didn't give me any answer either way. They seemed to think it didn't matter, but I don't want to get the timing wrong with this and trigger some sort of tax event.

I'm thinking I do the Mutual Funds now (they are considered a "change of owner") which I think would be a non-tax event while we are still officially married and do the IRA and Roth after the official date.

Any feedback would be much appreciated.
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Old 06-19-2015, 01:06 PM   #2
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I'd ask a CPA or tax attorney for the tax implication of transferring pre or after the divorce is final.
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Old 06-19-2015, 01:39 PM   #3
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Check out IRS Publication 590 on IRA's. There is a section about how this needs to be done so that it is not a taxable distribution to you. Generally, it is a direct transfer of assets to the spouse.
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Old 06-19-2015, 02:27 PM   #4
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I think you also should do this under the Decree of Divorce Asset Distribution or something like that. My broker wouldn't do anything until he got that.

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Old 06-19-2015, 03:07 PM   #5
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Have you asked the people that helped you with the divorce? I would think that they should know. I would also think that it would be spelled out in the Judgement.
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Old 06-19-2015, 03:54 PM   #6
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Thanks for all the replies!

To be clear, I've got the right docs from (and for) Vanguard to do the transfer(s) correctly, I'm just not clear on the timing. I'll checkout the IRS publications, good idea.

The divorce helper peeps won't/can't answer any kind of legal/tax question.

Just remembered another question I think I know the answer to, but it can't hurt to discuss. AFAIK, as long as you are officially divorced by end of year, you file taxes for that entire year as single. That sound right? I will of course be double (and triple) checking.

Thanks again.
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Old 06-19-2015, 04:34 PM   #7
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Not sure about an IRA, but I processed one for a 401(k)... I till probably mess this up, but it was a QDRO... it was from the court and said what to do... there was not 'waiting' for it to get done... when the order was given, he had to present it to us right away...

We were using Fidelity and it went easily... they opened a new account for the ex and transferred the money into it...

I am surprised that you get to choose when to do the transfer....
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Old 06-19-2015, 05:36 PM   #8
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Not sure about an IRA, but I processed one for a 401(k)... I till probably mess this up, but it was a QDRO... it was from the court and said what to do... there was not 'waiting' for it to get done... when the order was given, he had to present it to us right away...

We were using Fidelity and it went easily... they opened a new account for the ex and transferred the money into it...

I am surprised that you get to choose when to do the transfer....
I was a little surprised too once I got into the process. If the divorce is amicable it appears things are somewhat on the honor system. In other words, if she doesn't bring it to the court's attention that I haven't followed some part of the provisions, no one is coming back to "check up" us.

I've read about a QDRO. Problem is, it's not a form but a description of what counts as one. I'm pretty sure the CA form FL-345 Property Order Attachment to Judgment is my QDRO. I'm not finding a "due date" on it anywhere.
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Old 06-19-2015, 09:05 PM   #9
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I have never been involved in a divorce so can't speak from experience. That said, why not ask your soon to be former spouse on what date s/he wants you to determine the date and methodology for calculation of value, the paperwork for the receiving account and that you agree that his/her share will be transferred by XXX date.
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Old 06-19-2015, 09:51 PM   #10
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IRAs are not supposed to be something you can just give another person. You can do that as part of a divorce settlement because it's under the authority of the divorce decree. Until you have that, the custodian should refuse your request to transfer. If you do somehow get them to execute a transfer, you are at risk of it getting ruled a distribution since there was no valid divorce decree ordering the transfer at the time.
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Old 06-19-2015, 11:35 PM   #11
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I believe you should wait until the divorce agreement is finalized (ie are divorced).
Besides the tax issue, pretend you transferred 50% , then when the final decree is done it says you are to split the assets, so now you have to transfer "another 50%" .

All the divorces I'm aware of do the actual transfers post the final stamping of the divorce papers.
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Old 06-20-2015, 12:08 AM   #12
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IRAs are not supposed to be something you can just give another person. You can do that as part of a divorce settlement because it's under the authority of the divorce decree. Until you have that, the custodian should refuse your request to transfer. If you do somehow get them to execute a transfer, you are at risk of it getting ruled a distribution since there was no valid divorce decree ordering the transfer at the time.
Right, but I have the judgment (decree), in hand, stamped as GRANTED. In CA the way it works is; you file for the divorce, then fill out and supply many documents , get a judgment from the court and then you have to wait out a period of 6 months from the original file date for it to be official.

So basically I have documents that say, "if you don't do anything (with regards to filings with the court) before this date in August, you will be divorced on this date in August."
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Old 06-20-2015, 12:13 AM   #13
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Originally Posted by Sunset View Post
I believe you should wait until the divorce agreement is finalized (ie are divorced).
Besides the tax issue, pretend you transferred 50% , then when the final decree is done it says you are to split the assets, so now you have to transfer "another 50%" .

All the divorces I'm aware of do the actual transfers post the final stamping of the divorce papers.
As I mention in my reply above, I have the stamped papers. I am thinking it's most reasonable to do the transfer after the official date. I was hoping someone in CA had gone through this and could relay their own experience.

It's interesting to me that Vanguard was so useless on this matter. You'd think they would say, "this is how it's done, send us the docs at this point in the process". They must do this often, no?
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Old 06-20-2015, 12:28 AM   #14
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A little more searching seems to indicate you pull the trigger after the official divorce date:
Quote:
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.
Quote:
If you make the transfer too soon, before your divorce is legally final, the transaction loses its immunity tax-wise.
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Old 09-18-2015, 08:22 PM   #15
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A follow up on how things went down:

1) Waited until the official divorce date passed.
2) Went to the (family) courthouse, where the divorce had been processed, and requested a certified copy of the decree.
-- They handed me an entire set of forms with an embossed stamp and the date they stamped the docs. (Required by Vanguard)
-- They instructed me not to remove the staple that holds the forms together.
3) Printed out IRA transfer forms from Vanguard with all the info filled in by me.
4) Found a place that does Medallion Signatures and had them sign the Vanguard forms.
-- My bank no longer does this but Chase will, even if you only have their credit card (which I've had since 1993(!)).
-- They needed to have (they wanted to see) my last Vanguard statement.
5) Sent forms to Vanguard via FedEx with signature required.
6) Vanguard ended up having to "upgrade" her Roth IRA to accept a non-mutual fund transfer (had a REIT in my mix of holdings).
7) Transfer completed yesterday.
8) Closure
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Old 09-19-2015, 06:59 AM   #16
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Been there, done that. Glad it went smoothly for you. I was sort of amazed as well how much of it is simply on the honor system.

Good luck with the next chapter of your life, my divorce was anything but amicable and even after that it gets better soon.
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Old 09-20-2015, 06:14 PM   #17
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Been there, done that. Glad it went smoothly for you. I was sort of amazed as well how much of it is simply on the honor system.

Good luck with the next chapter of your life, my divorce was anything but amicable and even after that it gets better soon.
Thanks!

Yeap, I was suprised (at least in an amicable divorce) how it was basically up to us to make sure things happened. I guess I thought somehow the state would dictate the conditions of the transfer(s).

GM
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