- 1). Negotiate the settlement in mediation with your attorneys or get a court judgment. Determine how much of the IRA owner's account value is to be transferred to the soon-to-be ex-spouse.
- 2). Open a new QDRO IRA. The ex-spouse receiving the money can open this account at any custodian they wish. They do not need to keep the funds at the same institution.
- 3). Obtain a QDRO. This is a specific court order that will be part of your final divorce documents stating which accounts will have a distribution taken and for how much. Have your attorney draw up the order to use the specific language needed to comply with the law.
- 4). Liquidate the exact amount defined in the QDRO. Some QDROs define the amount by a percentage. If this is the case, have the financial adviser get the value as of the date of the QDRO. For example, if the present value is $120,000 and the QDRO states to take 50 percent, find the value on the date of the QDRO (assume it is $100,000) and liquidate 50 percent of that (in this case $50,000). Provide the custodian with a copy of the QDRO.
- 5). Place the QDRO settlement check in the new custodial QDRO IRA immediately upon receipt. As with any rollover, you have 60 days from the date the check was issued to get the money in the account to avoid tax penalties. Provide the custodian with a copy of the QDRO.
- 6). Go your separate ways, each spouse managing their assets on their own and responsible for their own taxes.
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