This could be perfect for you, and if not for you, then share the news. An IMQ: an inter-marriage qualified domestic relations order can save you thousands of dollars.
We typically see qualified domestic relations orders (QDROs) in divorce. Since the IRS will not allow a transfer of tax qualified money without triggering income tax obligations, the only option, other than death, to transfer these assets is by a court order. In divorce, the court awards some part of the retirement account to the other spouse. The court order is sent to the plan manager, who then transfers some or all of the account to the spouse, while retaining the characteristics of the account as a tax qualified account.
The same can be done between married people who agree to shift the account, or part of it, with the use of an IMQ. It is a JOINT application filed in court by both spouses that requests that the court order a shift in ownership. There is no requirement to prove anything to the court, other than that both parties are requesting the shift. The court process is minimal, but you will need a lawyer.
Why would you do that?
- If one spouse is older than the other spouse, and required to take RMDs, but does not want to, shifting the account to the younger spouse stops the RMD requirement if the younger spouse has not yet reached that age or lowers the RMD according to the younger spouse’s life expectancy. This may be GOLD right now when the market has dropped and people really do not want to have to liquidate and take RMDs.
- If one spouse is seriously ill or has been diagnosed with a progressive illness, it may be a good idea to shift the IRA to the non-ill spouse. In some cases, it means that we can save the IRA from having to be liquidated if we eventually need to obtain Medicaid benefits for the other spouse. It opens the door for actually keeping it intact or annuitizing it for the well spouse, at the point of the Medicaid application. This way the taxes can be spread over a much longer time period.
It is not very often that we encounter financial rules that can actually help those of us that are not in the 1%. Now you have a new topic for conversation. Did you know?!!!
