Individual Retirement Accounts 

Individual Retirement Accounts (Called IRA’s) and Keogh plans are private retirement plans that are not maintained by employers, although they have many similarities to typical 401k accounts. Keoghs are essentially similar to other private retirement plans, but are set up for self-employed sole proprietors, partnerships or “S” corporations.

While a QDRO should not be required to divide an IRA in a divorce action, more and more companies are requiring that a formal/separate order, similar in nature to a QDRO be entered to divide the IRA account. The law only requires that a simple order or divorce decree be supplied to a plan administrator, however, with the ever-increasing complexity of many retirement plans, most plan administrators are now requiring some type of order. 

Traditional IRAs

Traditional IRAs are individual retirement accounts held by a bank, brokerage company or other financial investment firm that directs the investment of the deposited funds into specific stocks, bonds or mutual funds. One of the primary benefits to a traditional IRA is that a specific portion (based on one’s tax bracket) are made tax-deductible. However, the primary drawback is that when the funds are withdrawn, the individual is subject to federal income tax and possibly, state and local taxes as well.  

Roth IRAs 

Similar to Traditional IRAs, Roth IRAs are individual retirement accounts held by a bank, brokerage company or other financial institution that direct the investment of deposited funds into specific stocks, bonds or mutual funds. Roth IRAs significantly deviate from Traditional IRAs because the money is able to be withdrawn tax free. This allows the individual to forego a tax break when making contributions for a tax-break upon withdrawal to be used during retirement. Some plans further allow for withdrawal at any time, tax-free.  

Does an IRA Require a QDRO?

Again, it is not technically supposed to require a QDRO or other domestic court order to be entered, but more and more financial institutions appear to be trying to check all the boxes by requiring an order, similar to a qualified domestic relations order, be entered, to divide funds or set aside to the non-contributing spouse, their share of the IRA funds. Some custodians of IRA accounts will allow you to simply fill out and submit a form and a copy of your divorce decree, but many will not.  

If you need to divide, withdraw or transfer funds from an IRA following a divorce, reach out to us at Pingel Family Law, we can assist with the entry of an appropriate order to ensure that these funds are divided and transferred.