This “Tax Talk” question on the Yahoo Finance site does a pretty good job summing up important information on dividing an IRA (“individual retirement account”) in a divorce. This is sometimes a tricky topic for clients.
In a divorce, the first issue is what is legally-appropriate division of the retirement account, if any. Sometimes it’s preferable for a divorcing person to keep the entire balance of a retirement account and for their spouse to receive other assets to create an equitable settlement.
If you do decide to divide a retirement account, the process to divide it differs depending on what kind of account it is. Some divisions can be accomplished simply by stating what each person gets in the final decree and then notifying the account holder; for some accounts, like a 401(k) account or a pension plan, you will likely need a court order to divide the account. This is one of those things that it’s worth discussing with an attorney because there are some seemingly small details in those orders that can make a big difference!