Expert: David M Iannopollo - 5/29/2009

Question
My brother is getting divorced and it says the portion he'll be getting from his wife's 403b has to be rolled over to avoid her having to pay penalties.  Can this be rolled over to an IRA if it's going from her name to his name or does it have to be rolled over to something else?  Will he have to pay penalties on the amount being rolled over?

Answer
Hi Lori,
Since this money is coming from a tax deferred account (403b) it has to be rolled over to an IRA in order to keep it's tax deferred status and avoid taxes and penalties. This is one of the rare instances where funds can be moved from one person's retirement account to another's via a QDRO (Qualified Domestic Relations Order).

If he were to take any of these funds as a distribution, he would be taxed as ordinary income plus a 10% early withdrawal penalty if he is under age 59 1/2.

Keep in mind, an IRA can be invested in just about anything he chooses.

I hope this helps!

Dave
diannopollo@twcny.rr.com