An IRA can be a great source of funds for a divorcee looking to buy a home.

Did you know that the IRS might allow a divorcee (younger than 59 ½ years old) to withdraw funds without paying the 10% early IRA distribution penalty tax? In a divorce situation, there is often the opportunity to withdraw a lump sum if the money has not been transferred to an individual 401k account.  For example, if a married couple had a combined 401K worth $800,000 and it was divided equally, each spouse would technically receive $400K each.  If the spouse receiving the transfer of funds uses $200K of it for a down payment on a home prior to the 401K transfer to his/ her individual account he/she may have saved $20k ($200K times 10%) in tax penalties fees.    

If the 401K funds have already been transferred to the individual’s 401K plan and you’re younger than 59 1/2 the IRS may only allow you to withdraw up to $10K in a lifetime if you’re a first time homebuyer.  A first time homebuyer is defined as someone who has not had an ownership interest in a principal residence in the two years preceding the withdrawal.

If there are no other assets and you’re a divorcee that needs a down payment for a house, this is a good source of funds to know about.  Don’t wait until it is too late, contact Terry Citizen Kane at 310.729.0212 immediately.  For more information go to www.terrycitizenkane.com