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Could an inherited IRA play a role in divorce negotiations?

In community property states, such as California, all assets obtained over the course of a marriage are considered marital property. As such, they will be divided equally between spouses in the event of a divorce. However, while certain assets, such as an inherited IRA, may retain their separate identity throughout the process, some may wonder if they can use such an asset to negotiate a favorable outcome during legal proceedings.

An inherited IRA that is obtained prior to marriage may retain its separate identity throughout divorce. However, should the account become mingled with marital assets in any way, it could lose its separate identity and become community property. In some cases, if the account increases in value during a marriage, the amount of the increase could also be deemed marital property and thus be subjected to property division.

Even if an inherited IRA is deemed separate property, some may wish to know if they can use this asset as a bargaining chip during negotiations. For instance, a person who is seeking to pursue sole ownership of an asset such as the family home may wish to reach an agreement to provide the other party with funds from an inherited IRA in exchange. However, one must use caution when considering this as an option, as their could be devastating tax consequences without taking the necessary precautions.

Individuals who are going through a divorce may wish to explore every available option in protecting their financial futures. Since dissolving a marriage can be complex, a person in California could find it advisable to speak with an experienced attorney early on for guidance in making informed decisions concerning his or her finances. An attorney can provide a client with assistance in forming a strategy to pursue the most favorable outcome achievable during legal proceedings.

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