Will Getting Divorce Affect Your IRA’s Minimum Required Distribution?
If your retirement portfolio contains a Simple Employee Pension (“SEP”), or Simple IRA, you need to know how the minimum distribution system works. If you are going through a divorce, the rules regarding your retirement account are even more important to understand. Cleveland, Ohio estate planning and divorce attorney Dan Baron provides the following remarks.
Generally, at around age 70 everyone who participates in a qualified retirement plan must start making distributions from their retirement account. However, if you are getting divorced, the minimum required distribution may change. Under federal law, there is no adjustment allowed for post-year-end decreases in the value of your retirement account, such as could occur through investment losses, divorce, or a creditor’s seizing the account.
For example: Edward’s IRA is worth $1 million as of 12/31/05. He turns 74 in 2006, so his 2006 minimum distribution is $42,017.00. In 2006, he gets divorced, and the divorce court awards Mrs. Edward half of Edward’s IRA in a tax-free split. So, Edward’s IRA is reduced to approximately $500,000. Edward still has to take out $42,017 in 2006. In comparison, if the divorce court had awarded the entire account to Mrs. Edward, reducing Edward’s account balance to zero before he had taken his 2006 minimum required distribution, the 2006 distribution would be reduced to zero.
Getting divorced is probably one of the hardest challenges you may face. Don’t go through it alone. Contact Cleveland, Ohio divorce attorney Dan Baron. Attorney Dan Baron will fight for you, your assets, and your children. Contact northeast Ohio law firm Baron Law LLC today for a free consultation. You will speak directly with an attorney who will help you with your divorce and estate planning needs. Call an attorney today at 216-573-3723.