When a Minnesota couple divorces, retirement accounts are often among the assets that must be split. Retirement accounts take many forms; two of the most common are the 401(k) and the Individual Retirement Account, or IRA. While a 401(k) is provided by one’s employer, an IRA is opened and maintained by the individual. There are several different forms of IRAs, including traditional IRAs and Roth IRAs. IRAs can be funded with cash, stock, bonds or other assets. IRAs have significant tax advantages if they are set up and used properly.
When a couple divorces, some of the funds in an IRA can be considered marital property, if, during the marriage, the account owner made contributions to the IRA or the investments in the IRA appreciated in value. Under Minnesota law, marital property is subject to equitable division in a divorce.
The assets in an IRA can be transferred between spouses on a tax-free basis if the transfer is ordered in a divorce decree. The spouse who receives the funds can be subject to a federal income tax of 20 percent, however, unless the funds are rolled over into the recipient spouse’s own IRA.
The information in this blog post is general information only and should not be considered legal advice. Negotiating an advantageous property settlement for any individual requires careful review of the couple’s financial situation and the best strategy will depend on the specific facts in each case. Working with an experienced family law attorney who understands complex property division issues can help a spouse get what they are entitled to under the law.
Source: FindLaw, “Divorce, Taxes, and Your Estate Plan,” accessed Oct. 31, 2015