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Traditional IRA in Oregon Divorce Mediation

What to Know About a Traditional IRA in Oregon Divorce Mediation: The Short Version

A traditional Individual Retirement Account (IRA) is a pre-tax defined contribution retirement account not offered by an employer. The three most common ways that Matthew's clients handle a traditional IRA in mediation are:

Direct trustee-to-trustee transfer from one person's IRA to the other spouse's IRA or SEP-IRA.
The account holder keeps the entire IRA, and the other spouse receives a different asset of similar value.
The account is fully or partially liquidated, and the cash is used in the property settlement

Matthew will help you consider your choices holistically. Ultimately, you will be deciding what weight to give the simplicity of the outcome versus the tax consequences or tax uncertainty.

Any Traditional IRAs owned by either party need to be disclosed in mediation, whether or not you intend to divide them, and even if the account was opened before the date of marriage.

Please note that this page addresses only Traditional IRAs. Roth IRAs have their own page. and the information below should not be applied to Roth IRAs.

Discovery for a Traditional IRA: Information Needed in Mediation

At the beginning of mediation, Matthew will ask you to provide at least the following information concerning your traditional IRA:

The most current statement, to show the current balance and how the funds are invested
The transfer forms provided by the Trustee or Plan Administrator

Depending on how you decide to handle your traditional IRA, and depending on the options you may be open to considering, Matthew may request additional information to probe the viability of each option.

Taxation of a Traditional IRA in an Oregon Divorce

A traditional IRA is similar to a 401(k) in terms of its tax treatment and how it can be handled in a divorce, but there are important differences.

Handling a traditional IRA correctly in divorce mediation is important. A traditional IRA has specific tax advantages that you want to try to preserve, rather than destroying them unnecessarily because of making the wrong moves in the division process. The administrative steps, if not done properly, can result in costly taxes and penalties, and future disputes can arise.

Disposition of a Traditional IRA

The three most common ways that Matthew's clients handle their traditional IRAs are described above. There are several more options, but they are undesirable for a number of reasons, which Matthew can explain duirng mediation.

Matthew may recommend a particular disposition of the IRA, based on your circumstances. However, the way you choose to handle the ownership or transfer of your IRA is entirely up to you, assuming that both parties agree. Like all other decisions in mediation, the final decision is yours.

Tips for Your Trditional IRA in Divorce

Be sure the valuation is correct, the method of division is sound, and there is proper communication with the IRA custodian.
If you choose to transfer a portion of one spouse's IRA to the other spouse, it is helpful (but not required) for the receiving spouse to have an existing IRA at the same institution.
If the destination account (the receiving spouse's account) is not at the same institution, that's fine. There may be a few additional forms to fill out for the second institution, and you may have a little more back-and-forth communication with the institutions to ensure that the disposition is proceeding as you require. However, there is nothing legally different about working with the same institution versus working with two different institutions.

Matthew will help you achieve all of those objectives.

Next Steps

Schedule a 90-minute in-person or Zoom introduction (first hour is always FREE)
or a 30-minute free "meet-and-greet" as soon as you're ready to begin mediation.