I am under the age of 59-and-a-half and have been ordered by a divorce court to take money out of my traditional IRA to pay my former spouse. Is there any way I can avoid the 10% early withdrawal penalty?
The only divorce-related exception for IRAs is if you transfer your interest in the IRA to your former spouse, and the transfer is under a divorce or separation instrument (see IRC section 408(d)(6). The rules for this transfer either:
1. Changing the name on the IRA from your name to that of your former spouse (if transferring your entire interest in that IRA), or
2. A trustee to trustee transfer from your IRA to one established by your former spouse. In this case a rollover from your IRA to your former’s spouses IRA does not qualify. Continue reading