Question & Answer

Question: We have a customer who says he will shortly be going through a divorce. He wants to take his IRA and divide it between himself and his soon-to-be-ex-wife. Can we split his IRA into two IRAs, one in each of their names before the divorce settlement?

Answer: We called IRS for the answer to this (phone (410)962-2590, ask for IRA section) . They told us there are only two ways to move money out of an IRA other than regular disbursement. One is death. The other is with a Domestic Relations Court Order. So the answer is no, you can't split the IRA before the divorce settlement. Wait for the court order.

Note from Editor: I've had a couple of calls about a segment I did on Skylink for the American Bankers on the Uniform Commercial Code (UCC). In the video, which I did almost a year ago, I said that under the new UCC, (which has now been adopted by 50 states) that if there are two names as payees on a check and "either" or "or" were not specified, you should assume it is an "and" and get both endorsements. In other words if the payee reads Barbara Hurst and Bill Hurst-get both endorsements. If it reads Barbara Hurst/Bill Hurst, or one name stacked on top of the other with no "and" or "or"-the UCC says the payee then implies "or". I suggested at that time, as did most financial institution attorneys, that you might rather consider payees with no "or" showing to be "and", and require both endorsements until the UCC was challenged in a court of law-it was simply the more conservative point of view. Our attorneys tell me that the premise has now been challenged in court-and the UCC prevailed.

Therefore, our opinion is now to consider the payee to be an "or" if the "and" is not specifically stated. Sorry if the Skylink segment caused confusion. At the time it aired, it was correct. But in this business, it seems nothing stays the same very long!

One last word of caution-take care that you don't have an insurance check that has two payees, no "and" on the front of the check, but the wording on the back of the check definitely states that two endorsements are required. You'll still need both endorsements in that case.

Copyright © 1997 Bankers' Hotline. Originally appeared in Bankers' Hotline, Vol. 7, No. 7, 6/97