IRAs and Divorce

April 27, 2019August 4, 2020
by Angie

Angie

Like other assets, IRAs – individual retirement accounts – are considered community property in many California divorce cases. But IRAs in a divorce aren’t always considered community property; in fact, they can be pretty complicated to sort out.

Here’s what you need to know about your IRA and divorce in California.

Related: Divorce and pension payout

IRAs and Divorce

Your individual retirement account may be yours and yours alone, or part of it may belong to your spouse. Even if it does belong to you alone, you may end up negotiating with it during your divorce. Your Stockton divorce lawyer will give you case-specific advice based on your situation.

The state of California treats IRAs the same way it treats other types of property. Your IRA can fall into one of three categories: separate property, community property, or commingled property.

IRAs as Separate Property

If you contributed to your IRA before you were married, and not during the time you were married, it’s generally considered separate property. There are exceptions, though, which you and your attorney can discuss. Separate property is property that only you have the rights to – your spouse does not have any rights to your separate property.

IRAs as Community Property

If you contributed to your IRA after you were married – such as, for example, when you started a new job as a newlywed – the state of California generally considers it community property. That means it belongs to both you and your spouse, because you made the contributions with money that belonged to both of you at the time.

IRAs as Commingled Property

If you or your partner had a pension or retirement benefit from a job you had before and during your marriage, some of your contributions to it are considered commingled. When an IRA is commingled, the contributions you made to it before your marriage are separate property and the contributions you made to it during your marriage are community property.

In cases like these, it’s sometimes beneficial to hire an expert who can help sort through all your contributions over time and zero in on what portion of your IRA is community property and what portion is separate property.

After you separate from your spouse, the state considers the contributions you make to be separate property. However, like everything else in divorce, there are some exceptions – so it’s in your best interest to discuss the specifics of your case with your attorney.

How Do You Divide an IRA in a Divorce?

When the whole situation is pretty clear-cut, such as when all your contributions are either separate or community property, dividing an IRA in divorce is just like dividing other property. You may choose to use your IRA as a negotiation point, or you and your spouse can agree to split the benefit.

No matter what you choose to do, your attorney will suggest that you work it out on your own without having to litigate it in court, though. When you and your spouse are able to reach an agreement together, rather than forcing the judge to decide who gets what part of your IRA in the divorce, you’ll both be more satisfied with the outcome.

Can a Spouse Get an Entire IRA in a Divorce?

In some cases, through negotiation, one spouse can get the other spouse’s entire IRA in a divorce. However, the judge in your case will only sign off on an agreement you make if it’s fair to both parties – and that means one spouse can’t take everything and leave the other in the poorhouse.