While inheritances are often considered separate property when Pennsylvania couples go through a divorce, inherited IRAs are playing a growing role in property division. Individual retirement accounts and other types of retirement funds are often some of the most significant assets held by a couple. Even when the couple has significant wealth, these accounts are often some of the largest, and their division requires a specific court order in order to protect their tax-favored status.
However, though regular IRAs have been a major part of property division settlements over the years, inherited IRAs are increasingly playing a larger role as well. Frequently, inheritances remain separate property even in a long marriage, especially so long as they are not combined with other marital assets. Due to the restrictions in place on inherited IRAs, it is much more difficult to commingle them with other property. Therefore, in many cases they are considered to be outside the direct reach of a property division settlement. However, people with inherited IRAs may frequently wish to use these assets to account for other parts of the property settlement.
For example, if one partner wants to keep the marital home, a large inherited IRA could go a long way toward making the division an equitable one. While the rules for dividing regular IRAs have been well-established in tax law, no such clear guidance exists for inherited IRAs.
Dealing with the complexities of asset division can be overwhelming even for savvy money managers. A family law attorney can represent a divorcing spouse in order to protect his or her interests and assets and secure a just settlement.