Do I need a QDRO to divide an IRA?

The short answer is most likely! IRA division covers any individual provided IRA (Traditional, Rollover, or Roth) and any employer provided IRA (SEP, SARSEP, or Simple). A non-taxable IRA to IRA transfer in divorce is governed by IRC §§ 408(d)(6). An IRA division can be handled in the divorce judgment or in a separate IRC §§ 408(d)(6) Order (“408 Order).”


Whether or not you need a separate domestic relations order (“QDRO”) depends on your divorce judgment language. It is critical to have clear divorce judgment language so that the IRA Custodian can implement an IRA to IRA transfer based on the divorce judgment. The division of the IRA using our jJudgment language tool should be sufficient for the IRA Custodian to implement an IRA to


IRA transfer without tax consequences to either spouse.

You should not need to prepare a separate 408 Order unless one of the following occurs:


  1. The participant may not cooperate with signing transfer documents and you need an order with extra enforcement language;
  2. The IRA is an employer provided IRA (SEP, SARSEP, or Simple and is requiring a QDRO that complies with the Employee Retirement Income Security Act (ERISA). (Our IRA DROs not only comply with the relevant Internal Revenue Code sections for divorce, but also comply with ERISA);
  3. The parties do not want to disclose the terms of the full Judgment to the Custodian;
  4. You did not use our sample judgment language and therefore the award in the divorce judgment is not sufficient.

If you are not sure whether a QDRO is needed, we recommend proceeding with filing a QDRO in the abundance of caution so no adverse tax consequences occur.


Section 408(d) (6): Transfer of account incident to divorce states as follows:

“The transfer of an individual’s interest in an individual retirement account or an individual retirement annuity to his spouse or former spouse under a divorce or separation instrument described in subparagraph (A) of section 71(b)(2) is not to be considered a taxable transfer made by such individual notwithstanding any other provision of this subtitle, and such interest at the time of the transfer is to be treated as an individual retirement account of such spouse, and not of such individual. Thereafter such account or annuity for purposes of this subtitle is to be treated as maintained for the benefit of such spouse.”

This is a murky area of law. The transfer of an interest in an IRA to a former spouse’s IRA pursuant to a divorce or separation instrument does not result in taxation. §§ 408(d)(6), 71(b)(2)(A). The IRA is then maintained for the benefit of the former spouse. However, in order for a transfer to be non-taxable, parties must make sure that the transfer is a documented requirement of a divorce or other court order, otherwise it may be deemed a taxable distribution. See Czepiel v. Comm., TC Memo 1999-289 (divorce judgment did not specify that required asset transfer come from IRA); Jones v. Comm., TC Memo 2000-219 (husband received IRA distribution check then endorsed check to divorcing spouse); Private Letter Ruling 9422060 (Mar. 14, 1994) (transfer of IRA balance to spouse not incident to divorce); Private Letter Ruling 8820086 (Feb. 25, 1988) (transfer of IRA balance to spouse not incident to divorce); PrivateLetter Ruling 9344027 (Aug. 9, 1993) (transfer of IRA as part of private separation agreement deemed taxable).


The “divorce or separation instrument” must qualify under IRC §71(b)(2)(A). Failure to have a divorce judgment that does not clearly award the IRA to IRA transfer could result in immediate taxation to the account owner. That is why most Custodians of IRAs are cautious. If the divorce orders do not clearly order the IRA to IRA transfer (e.g. clearly identify the IRA and the amount or percentage to be transferred to the nonmember spouse), most custodians will not allow the IRA to IRA transfer to proceed until a subsequent QDRO clearly awards said transfer. So a separate domestic relation order may be required either to satisfy the IRA custodian or to support Sec 408(d)(6) treatment.


In most cases, the expense of preparing, filing and transferring IRA to IRA pursuant to a clear subsequent IRC Section 408 Order outweighs the risk and expense of battling the IRS on this issue.

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