Divorces are often messy, as was the case for Michigan doctor John Kirkpatrick. Dr. Kirkpatrick separated from his wife, Christiana, in 2012, but six years later, found himself in Tax Court after he failed to pay taxes on $140,000 in IRA distributions he withdrew to transfer to his ex.
Recently, in his case, the Tax Court reminded us that there are only two ways to make a tax-free transfer of IRA assets in a divorce proceeding.
One way is to simply change the name of the IRA to the ex-spouse. The other way is to directly transfer IRA assets to an IRA owned by the ex-spouse.
What you cannot do, however, is take a distribution from the IRA and transfer those funds to a checking account. That mistake is what ended up costing Dr. Kirkpatrick.
Read more here.