Written Instrument Incident to Divorce Decree

[Guest qdroatty]

Fact scenario: Parties were divorced in 1997 and the settlement agreement provided that the parties would divide pursuant to a QDRO the husband's Optional Retirement Plan. The ORP is NOT DIVISIBLE by QDRO and the Participant cannot withdraw any amounts from it until retirement (or death, of course). In the intervening years the parties attempted through their original divorce attorneys to agree to a settlement of this problem. Now in 2007, I have been asked to attempt to remedy this problem and my proposed solution is to require husband at the time of retirement to rollover to an IRA in his own name (a permitted transfer under the plan) the amount due his ex-wife and then to change the name on the IRA account to her name.

My question is whether the agreement the parties sign to effectuate this transfer will be "a written instrument incident to a divorce decree" for purposes of section 71(b)(2)(A) and 408(d)(6).

I suppose that I could draft the agreement as an amendment to the settlement agreement but because I generally deal only with QDROs I was not certain of the best way to handle the form of the agreement.

Finally, I think that the transfer would be tax-free under 1041 as the fact scenario likely satisfies the requirements to rebut the presumption in regs.

Any thoughts would be appreciated.