Is it true that when IRAs are split in a divorce, you can take a one-time withdrawal without penalty? I'm 56, newly divorced, currently unemployed and in a training program to assist me with future employment. A sizable IRA will roll over to me from my ex. I'd consider taking a withdrawal because I'm looking to stay in my house, and need funds to assist me in buying him out.

You may be thinking of 401(k) plans, which do permit a penalty-free early distribution in divorce cases. IRAs do not.

To divide an IRA without tax consequences, you need a court order telling the spouse who owns the IRA to instruct its custodian in writing to transfer a portion of the money into a new IRA in the other spouse's name. A transfer incident to divorce is tax-free, but there's no divorce exception for early distributions, says Barry C. Picker, a Brooklyn IRA expert.

If you take an IRA distribution before age 591/2 you'll owe a 10 percent penalty (plus taxes) unless you qualify for a different exception. True, you can take a penalty-free IRA distribution of up to $10,000 to buy a first home -- but a first-time home buyer is defined as someone who hasn't owned a house in the previous two years, so it doesn't sound as if you qualify.

This may be less unfortunate than it seems. Financial advisers say the most common mistake women make in a divorce is keeping the house -- an asset that has high maintenance costs, doesn't generate income, and may not appreciate much in value. In most cases, it's a better plan to sell the house and split the proceeds.

THE BOTTOM LINE IRAs can be divided without incurring taxes in a divorce, but early distribution rules still apply.

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