How to Transfer a Roth IRA From a Husband to a Wife

If you have to transfer a Roth or traditional IRA to your spouse, that's bad news. You can't just give your spouse your IRA as a gift: the only time you can transfer ownership is when you're splitting up your assets as part of a divorce. If you follow the federal rules, there's no tax on the transfer.

Divorce

To transfer a Roth in divorce you need something in writing. A post- or prenuptial agreement or a divorce order requiring you give up the account will do the trick. You can also divide it so that your spouse gets part, but not all the assets. This is different from just writing her a check for the value of the Roth. With a divorce transfer, she can manage the account just as if she'd owned it from the start.

The Transfer

You can't transfer your Roth until the divorce is final. If you're giving up the entire account, the simplest way to do it is direct your account trustee to change the owner's name from yours to your spouse's. If you're dividing the account, you can have the trustee transfer some of the assets to your spouse's Roth, either a new one or an established account. You can also change the name to your spouse's and transfer your remaining share to a new Roth of your own.

Errors

If you don't follow the required procedure -- for example, you write your spouse a check or you transfer ownership before the divorce is over -- the IRS can treat the transfer as if you made a regular withdrawal. That's not as bad with a Roth as a traditional account because you can make withdrawals tax-free, up to the limit of your original contributions. If you take out your earnings as well, and you're younger than 59 1/2, however, you pay tax.

Fairness

In most divorces, the court's goal is to divide property fairly between spouses. This gets tricky if, say, your spouse gets your Roth in return for you keeping the house. You can turn a profit on the sale of the house immediately, but your spouse may not start withdrawing from the Roth for years. The relative value of the two investments depends on how the Roth grows between now and then. That's hard to predict.

About the Author

A graduate of Oberlin College, Fraser Sherman began writing in 1981. Since then he's researched and written newspaper and magazine stories on city government, court cases, business, real estate and finance, the uses of new technologies and film history. Sherman has worked for more than a decade as a newspaper reporter, and his magazine articles have been published in "Newsweek," "Air & Space," "Backpacker" and "Boys' Life." Sherman is also the author of three film reference books, with a fourth currently under way.

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