Using IRA to pay attorney fees related to divorce

[bzorc]

Can a participant withdraw funds from an IRA account to pay fees related to divorce proceedings and avoid the 10% excise tax, since the IRA owner is not age 59 1/2? I have not heard of this, but some people in the office that I work at say they have read articles that indicate that this is an allowable distribution to avoid the excise tax.

Thanks for any replies.

[BPickerCPA]

No such exception. I have no idea where you heard it, but it is completely incorrect.

[No Name]

Barry,

With all due deferance. Due to a DRO, I'm asked to split my IRA 50-50. Spouse asks for attorney fees. Couldn't we agree on 40-60 with the understanding that the attorney gets paid from the difference?

No reference materials here, but money is fungible...

[QDROphile]

See section 72(t)(3)(A). The exemption under section 72(t)(2)© from the 10% penalty applicable to QDROs does not apply to IRAs.

You can shift the obligation to pay the expense to the former spouse along with the additional money in the new IRA for the former spouse that will be sufficient to make the payment, but the former spouse will have to pay the 10% penalty. Nothing is gained with respect to the penalty tax on the amount equal to the expense unless the former spouse has attained age 59 1/2.

There may be other tax consequences of the agreement to have the former spouse pay an expense of the IRA owner.