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How are IRA accounts divided after a divorce?

On Behalf of | Aug 1, 2024 | Family Law

Dividing marital property is often one of the most complex and contentious aspects of a divorce. Dividing assets such as cash and real estate is a relatively straightforward process, but dividing retirement accounts can be more complex.

How are individual retirement accounts divided after a divorce?

How are IRAs divided?

Indiana law considers most property acquired before or during a marriage marital property. The courts generally divide all marital property equally between the divorcing spouses. However, this does not mean that the court will divide each asset equally. Instead, the court will divide assets in a way that leaves both spouses in a similar financial position.

What are the options for splitting an IRA?

The first step is to determine how much the IRA is worth. A financial advisor can help you with this. Next, you must determine whether to transfer funds from the IRA to a separate IRA account for the other spouse or to make an agreement to award some other type of property that is equal in value to one spouse while the other retains the IRA. For example, if both spouses have IRA accounts that are equal in value, the divorcing spouses might decide to each keep their original account, rather than dividing both accounts.

If you can reach an agreement with your spouse, the court will usually honor this agreement. However, if you can not, the court may decide how best to divide the accounts.

The best solution for the division of IRA accounts depends on your financial goals and whether your spouse is willing to negotiate. You may want to speak to a financial advisor before making a decision.