How to divide IRA assets in a divorce

During a divorce in New York, spouses generally divide all assets, including retirement accounts. Depending on how the judge or mediator settles the case, an entire account might go to one spouse, perhaps in exchange for another asset of similar or equal value, such as a house. If you are getting a divorce, it will help you to understand the rules that apply to asset division. That way, you can make sure that you have listed everything under its proper label.

Separate kinds of tax laws and rules apply to different types of retirement accounts. You don’t want to take a chance that you owe taxes because the New York divorce court mislabeled your assets during your property division. Your best insurance is to understand the categories yourself.

Legal methods for splitting retirement plans

There are two main types of retirement accounts: qualified plans and IRAs. Each one features its own legal term and process.

Qualified plans

A common type of qualified plan is the 401(k). You should divide any qualified plan with a Qualified Domestic Relations Order (QDRO). If a spouse uses a QDRO to divide qualified plan assets between former spouses, children or other dependents, the transactions are tax-free. The receiving party can then add the assets into his or her own retirement account, either an IRA or a qualified plan.


A process called transfer incident to divorce is used to divide IRAs. If you label the division of an IRA as a transfer incident to divorce, then you will owe no tax in the transaction.

The court can make mistakes in labeling retirement assets, especially in cases of complex asset division. To ensure that the courts handle your assets properly, you will need to list your assets under their correct categories in your filing documents. A qualified divorce attorney and a financial professional can help you ensure that you have listed all your assets and labeled them correctly.