Cross post this on the Household Finances board. I'm not an expert but here are my opinions:

1. Does anyone know if the 10 day window is correct?

Maybe, maybe not, I believe these things are individual to the bank and the instrument (in this case, your CD).

2. Does anyone know what the penalty will be for taking the money out of the IRA and would I pay that at tax time?
I need it to buy a house, which I will do some time in the next year (hopefully), so I don't want to put it back in an IRA.

I believe the early withdrawal penalty is pretty high, like 10%. There are situations that avoid the penalty, such as to pay medical bills and first time home buyers. Maybe you could get your husband to keep the entire IRA CD and give you a settlement of something less than half but more than half minus 10%?

3. My husband refinanced our house, so that he could give me my portion. When I file my taxes next year, will I have to claim that as income?

My guess on this is that it is not income and thus not taxable, but rather a splitting of marital assets pursuant to a divorce, you are simply getting your own money.

I believe what Graywings said is correct. But you should check with your lawyer, who set up the documents stating how the parital property is to be distributed. The lawyer may know if a divorce qualifies as some type of event that would allow you to undo a CD. Of course, I think ending a CD early only required forfeiting the interest -- if it is a fairly new CD, little interest will have been earned. Of course I could be totally wrong, as I'm sure banks have all sors of new penalties and fees in this day and age.

As Graywings said, is there a chance your husband got enough cash out of the refi'd house to simply cash you out what your share of the IRA would be?

Laurie, I hope you have a good divorce attorney. Get one tomorrow. It sounds like your husband - soon to be ex - may be hiding money or moving it around. Get an attorney.

#3 needs to be well checked upon, here in Canada, the proceeds of the sale from the principal residence are not taxable but alimony settlements are, since they are income. You need a tax expert to determine the viability of the different settlements, and to make sure you are not going to be stuck with more tax than you should be paying, if it can be avoided.

I don't suppose that it's a Roth IRA?

If it is, then the taxes were prepaid.

I agree with threedgrad, get an attorney. Each state has their own rules, for instance, Texas has a 'just and right' division which in some cases means one party or the other gets considerably more than 50%; and if your state has the inception division it is possible that the house may belong to one or the other of you. Property is complicated, taxes are complicated, and attorneys are well worth consulting in a case like this because you can be stuck with taxes or lose a bunch of property that should be yours, and if you had a chance to look into the division particulars and did not, you may not be able to bring up fraud as a defense later.
There is a considerable amount of expertise on this board, but all the same, I think you should consult a divorce attorney.

Okay, I guess I should have given y'all a little more information.

I hired an attorney back in February and my husband and I decided to do an uncontested divorce, which is where we decide between us how to divide things and the attorneys basically do the paperwork and they're there to give us advice of course. I signed the papers Thursday and they were sent to his attorney for review. My attorney feels that everything we've decided on is fair. My husband refinanced the house so that he could give me my portion of what we put into it. He had the house before we were married and his name is the only one on the deed. Therefore, he gets the house. We don't have any other extra money, so there's no way he could give me my portion of the CD other than from the CD. It will be maturing this Sunday, so we will get all of the interest earned, but I'm assuming I have to pay the penalty plus tax since I'm only 45.

I will bring it up with my attorney again. When I mentioned using the CD before, she strongly advised that I not touch it, but that's the only way I can buy a house and I have a teenage son that really needs a place he can call home. It may actually be about a year before I have enough saved up to buy, but I could it back in an IRA if there is some type of "new home buyer" exemption. I don't know if I would be considered a new home buyer or not. My name was on our mortgage, but it wasn't on the deed.

Unfortunately, it's not a Roth IRA.

Lucille - We live in Texas.

Laurie

I have one more question. I hate to sound naive, but I was a stay-at-home mom for 16 years, so I didn't start earning a paycheck until December, 2007. My husband has always done our taxes. When you say the money from the CD will be taxed, how much are we talking about? Is it based on how much I make? Can anyone give me a ballpark figure?

Laurie

MsRose - it might be a good idea for you to read the information provided by the IRS, rather than have us give you our versions of this. We don't know whose name the IRA is listed in, don't know what type of IRA you have, your ages, the amount, and other information that will determine the outcome of your withdrawal of this money.

So, to get you started, here is a link to IRS Pamphlet 590. Start with the Introduction.

Here is a link that might be useful: Traditional IRAs

Thanks, graywings.

I found this in the link you posted:

Prohibited Transactions

Generally, a prohibited transaction is any improper use of your traditional IRA account or annuity by you, your beneficiary, or any disqualified person.

The following are examples of prohibited transactions with a traditional IRA.

Borrowing money from it.

Selling property to it.

Receiving unreasonable compensation for managing it.

Using it as security for a loan.

Buying property for personal use (present or future) with IRA funds.

So, is that last part saying I can't use the money from the IRA to buy a house?

Laurie

Okay, I guess there's something I'm missing, because this section makes it sound like you can avoid paying the 10% penalty if you put it towards a home:

Exceptions
There are several exceptions to the age 59½ rule. Even if you receive a distribution before you are age 59½, you may not have to pay the 10% additional tax if you are in one of the following situations.

You have unreimbursed medical expenses that are more than 7.5% of your adjusted gross income.

The distributions are not more than the cost of your medical insurance.

You use the distributions to buy, build, or rebuild a first home.

Laurie

Regarding the exceptions to the 59 1/2 rule: this won't be a first home for you; you own or owned one with your husband.

As for the prohibited transactions, I believe that refers to an IRA that is other than money. You can buy gold with your IRA funds and hold the gold as an IRA. But you can't buy a gold chain and wear it and call it an IRA. If you are willing to pay the hefty penalties involved in cashing in an IRA (and they get you a couple of ways), you can do anything you want with the money.

But I don't think she did own a home with her husband . . . he had it prior to the marriage and his name was the only one on the deed. Is your -ex the father of your son? If so, is all of the custody and child support worked out? How about something addressing how college is to be paid for?

graywings - Thanks for the explanation.

Yes, my ex is the father of my son. We have shared custody and he will spend equal time with each of us, so there won't be any child support.

I'm wondering now if I should keep half of the IRA out and put the other half back in an IRA. I'm guessing the more I keep out, the higher the tax bracket I'll be in and the more taxes I'll have to pay. Then, I could take the other half out next year and I wouldn't be hit with all of the taxes at once.

I'm starting to get really depressed knowing I need every penny of that money and I'm going to lose a big chunk of it when I pay taxes.

Laurie

Boy this is sticky. (You have my empathy, Laurie.)
I'm leaning toward jakabedy's viewpoint, that technically you did not own the home since your name was not on the deed. (That part about it being on mortgage but not on deed threw me a bit.) But, it depends on how deed is worded, how your state (and IRS?) views it as far as a marital asset. Maybe as spouse your name did not have to be on deed to be viewed as an owner in TX? But if it's cut and dried and your name did have to be on the deed, then it would seem you'd fall under the 'exception' category of first time home buyer and avoid those early IRA w/drawal penalties.

No doubt you'll take a hefty hit on your IRA between penalty and taxes. Understand tho, that sometimes things less than pleasant have to be done. Would encourage you as others have to consult with an accountant or good financial adviser (larger banks often have their services).

There might be an alternative. In my state first time home buyers qualify for a special grant to help with down payment and closing costs. I just checked, Texas also has program to help first time home buyers but it's temporarily out of funding per this site. However, that site might not be current (fingers crossed). That site links to Texas First Time Home Buyer Programs, which shows programs available, amount of funds available, and when it expires. Maybe you could latch onto something like that for assistance? If so, you could leave a good chunk of your IRA intact and then roll it over into an IRA with your name on it (no penalty for rollovers as I understand it).

How could she share a mortgage on a home without her name on the property? Or why would she put her name on the mortgage - meaning she had to pay the bank on a property she does not own in any percentage?
You will have to pay taxes and penalties on the IRA withdrawal, which the government takes immediately - your deduction on your taxes for the house loan interest paid and the property taxes paid may help recap those costs a bit.
What's your attorney say about this?

I think you need to talk to an accountant or tax attorney and not a divorce attorney about the implications of touching your IRA and whether you qualify as a first time home buyer.

Also, consider purchasing a condo rather than a house. I'm concerned that you are planning to put every penny you have into a house in an uncertain economy and housing market that may not have hit bottom yet. I know it sucks to go from a house to something less house-like but a house might not be the right fit for you right now.

I had to get my ex-husband to co-sign the loan so I could buy a house after our divorce because I had no income besides child support and a bit of alimony. The bank was not going to approve the mortgage with just me signing. Good luck.

See the link below for withdrawing money from an IRA for a first time home buyer.

Here is a link that might be useful: IRS rules for early IRA withdrawals

Laurie, while you think everything will work out the way you're both planning.. you should plan for it not. Things happen, I don't like that there is no child support figured out.. what if at some point you & your ex are not so cordial and you have to go back to court? Any clue how expensive it will be to change it? I can tell you it usually costs me $1,000 or more (usual is $2k-$3K) every time we have to go to court.

You also should do something in writing about medical for your child. If he ends up fracturing something or falls down the steps like my girl did; you could be left with high medical bills. In the last few years, I've paid over $15,000+ in uncovered medical expenses. He is supposed to reimburse me 75% after the 1st $250 but he does not. Also, he's screwed me with the deductible he picked which is very high - $800 alone just for my daughter. He's also lowered the tier on dental. Please protect yourself/child.

Who gets to claim your child on income tax?
What we did was my ex claimed her, I would claim head of household. I don't know if that will apply to you. When I remarried we alternated the deduction - odd years me, even years him.

Even though your name was not on the deed, it sounds like you lived there for your whole marriage - in NJ the house would be 1/2 yours regardless. The way they figured it out was they went back to when you would have moved in to find a value; then they would figure out how much the house was worth when you moved out, plus deduct what he had already paid on the house before you moved in IIRC. There was a formula used. From things you are writing, it sounds like you are not getting the correct credit. Are you sure your attorney is looking out for your best interests?

I'm glad you guys can be so civil right now but make sure you do research to make sure you are getting what you really deserve.

I have one more question. I hate to sound naive, but I was a stay-at-home mom for 16 years, so I didn't start earning a paycheck until December, 2007. My husband has always done our taxes.

Piece of advice - get copies of all the income taxes that have been filed.
You also want a copy of the marriage license and any other documents.
Make sure you have his social security number on file.

I agree with everyone that you need to talk to a tax accountant to make sure you don't make the wrong move in regards to this IRA, especially since it sounds like it's your main source of savings.

I agree that you also should be talking to an attorney in regards to child support. Are your incomes equal? In order to provide housing for your son, if your income is dramatically less than your husbands, he should have to help you otherwise, he has the big house and you're living with your mother. That's not even or fair.

Also, you need to get in writing who's paying for college, car insurance for your son, a car? It sounds lovely to just divide things up, but in reality, who's going to pay for clothing, shoes, hair cuts, sports equipment?

Also, I know you didn't ask for my opinion on this, so please don't be offended! But if your agreement is what it is and cannot be modified to help you get more cash upfront, then I think you should really think through the whole buying a house idea. Why not rent a house - at least for a year or two? That way you can keep your money in the IRA and have a safety net in case something happens and you need some cash.

I'll say it again, consult an attorney. One who will go over these questions with you and give you solid legal advice. It's worth the money.

moonshadow - You guys are amazing! I've bookmarked that site so I can check it when I'm closer to buying.

threegrad - When you say the government would take their share immediately, how does that work? I thought I would claim it as income at tax time and pay then. Do they some how know I cashed in the IRA and send me a bill? I'd actually rather pay it right away and get it over with. BTW, I was 22 and stupid when we got married, so I didn't know the difference in my name being on the deed and the mortgage.

kgwlisa - Thanks for the advice. I wasn't sure who exactly I needed to talk to. You're exactly right about my plans. I actually want a garden home so I don't have to mow the lawn. I was actually thinking this morning that I might should consider a condo, but I hate the thought of sharing a wall, especially with a teenage son that likes loud music. I also have a dog and the condos around here don't have yards. I'm definitely not ruling it out yet, but I'm hoping I can get a house.

Laurie

suero - Thanks for the link. So, is it saying that I can only use $10,000 from my IRA without paying a penalty? Just want to make sure I'm reading that right.

roselvr - Yikes, you're scaring me. There is a clause in the decree that talks about medical expenses. That's terrible that your ex doesn't pay. It says that we will share the costs equally. I really don't think I could get child support since my son will spend equal time with each of us. Both my attorney and my husband's said that's how it works. Plus, my older son who has some special needs is staying with my husband. I'm covering his insurance and prescriptions, but my husband pays for everything else. Of course, we would probably split any major medical expenses. The attorney put in the decree that I would claim him on odds years and my husband would claim him on even years. I am actually getting half of what we put into the house. Even though we had the house 23 years, we refinanced several time, so we still owed quite a bit on it. Even though we managed to do an uncontested divorce and we were civil at one time, that's no longer the case. I try not to talk to him unless I absolutely have to.

caroleoh - I'm not offended. I'm reading this book called something like Women & Money by Suze Ormann and I'm sure she would tell me not to take my money out of the IRA, but I really want a home and I hate to spend money on rent that I could be putting towards a house.

I knew I needed to talk to an expert, but I wasn't sure who that would be. It looks like I need to try and find a tax attorney or a CPA.

thanks, everyone!

Laurie

say you have $1000 in an IRA and penalty is 10% then you will only get $900 when you withdraw the money. The $900 then becomes income which you list on the tax form and have to pay taxes on unless you have enough write offs like mortgage interest.
As far as a home, I would go visit a mortgage broker and get prequalified - see how much house you can afford or if the bank will even give you a loan