IRA: The IRS states that the transfer of an IRA to a current or former spouse—under a decree of divorce, separation agreement, or a written instrument incident to the decree—is not considered a taxable event. A common scenario is that ½ of the IRA is transferred to the ex-spouse’s IRA. This transfer of ½ of the IRA is not a taxable event but withdrawals from the IRA in the future may be taxable, depending on age and account type.
Taxable account: The IRS states that typically there is no recognized gain or loss on the transfer of investments between current or former spouses if the transfer is due to divorce. This means that the transfer itself from one person’s taxable account to the other is not a taxable transaction.
Note that Betterment is unable to choose specific lots on transfer requests. Transfers are executed based on current market value of those holdings.
A common scenario is that ½ of the account is transferred to the ex-spouse. That transfer of ½ of the account due to divorce would not ordinarily be a taxable event, but selling assets out of the receiving account in the future could be a taxable event.