What happens to a cashed out Roth IRA in a divorce settlement?
The husband's Roth can be cashed out (has had it over 5 years and is over 59 1/2).
The wife has been granted the Roth in the property settlement. The wife needs the cash.
If the husband cashes out the Roth account and gives the wife the money, will the wife incur any taxes or penalties on it?
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No, given the circumstances, no tax due.
The fact that the wife wants cash makes my next comment moot, but for others - An IRA in either flavor belongs to the individual and cannot be gifted as such. But. Under a QDRO, a Qualified domestic relations order, the account may be transferred as an IRA. For a spouse who doesn't need immediate access and would prefer the gross amount and continued growth, this might be preferable to getting the cash. For a pretax IRA, cashing out the whole account can be costly compared to the partial distributions each year.
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