401K in divorce proceeding

#4 09-06-2004, 07:28 PM

hankal[at]aol.com (Hankal) wrote:

- quote -

> The lawyers and parties agree that the man has to pay 25k to
> his wife to settle some credit cards. The money is to come
> from the mans 401K. This is not the total amount in the
> 401K. Does the man have to pay taxes on the 25K and does he
> have to pay the 10% penalty? He is not 59 yet. Is there any
> way that he can give the wife the 20k from the 401K and she
> is responsible for the Tax?

401(k) withdrawals forced by a QDRO (Qualified Domestic
Relations Order) are exempt from the 10% penalty. This would
be the ideal way, possibly the only way, to do it. They just
need to get the court to make an order in a form that the
plan administrator will understand to be a QDRO: different
administrators will have their own specific requirements to
follow.

--
Chris Green

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#3 09-01-2004, 11:20 PM

hankal[at]aol.com (Hankal) writes:

- quote -

> The lawyers and parties agree that the man has to pay 25k to
> his wife to settle some credit cards. The money is to come
> from the mans 401K.

I'm assuming here that it's coming from the 401(k) because
he doesn't have it anywhere else. If he could pay this from
non-retirement funds but the agreement specifies the 401(k),
he needs a new lawyer.

- quote -

> This is not the total amount in the
> 401K. Does the man have to pay taxes on the 25K and does he
> have to pay the 10% penalty? He is not 59 yet. Is there any
> way that he can give the wife the 20k from the 401K and she
> is responsible for the Tax?

Yes, yes, and no.

Phil Marti
Topeka, KS

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#2 09-01-2004, 10:42 PM

"Hankal" <hankal[at]aol.com> wrote:

- quote -

> The lawyers and parties agree that the man has to pay 25k to
> his wife to settle some credit cards. The money is to come
> from the mans 401K. This is not the total amount in the
> 401K. Does the man have to pay taxes on the 25K and does he
> have to pay the 10% penalty? He is not 59 yet. Is there any
> way that he can give the wife the 20k from the 401K and she

Yes. Do a QDRO. If the lawyers involved don't know to do a
QDRO in a divorce, I suggest getting new lawyers.

--
David M. Woods, EA, ChFC, CLU
Woods Financial Services
Norwood, MA 02062
www.woods-financial.com

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#1 09-01-2004, 10:04 PM

Hankal wrote:

- quote -

> The lawyers and parties agree that the man has to pay 25k to
> his wife to settle some credit cards. The money is to come
> from the mans 401K. This is not the total amount in the
> 401K. Does the man have to pay taxes on the 25K and does he
> have to pay the 10% penalty? He is not 59 yet. Is there any
> way that he can give the wife the 20k from the 401K and she
> is responsible for the Tax?

If his lawyer is better than her lawyer, there's a way.
I don't recall the Code section which allows partition
of a retirement account in divorce, but there is one.

The problem is that she would then have to pay taxes
and the 10% penalty on the 25K.

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09-01-2004, 10:04 PM

hankal[at]aol.com (Hankal) writes:

- quote -

> The lawyers and parties agree that the man has to pay 25k to
> his wife to settle some credit cards. The money is to come
> from the mans 401K.

I'm assuming here that it's coming from the 401(k) because
he doesn't have it anywhere else. If he could pay this from
non-retirement funds but the agreement specifies the 401(k),
he needs a new lawyer.

- quote -

> This is not the total amount in the
> 401K. Does the man have to pay taxes on the 25K and does he
> have to pay the 10% penalty? He is not 59 yet. Is there any
> way that he can give the wife the 20k from the 401K and she
> is responsible for the Tax?

Yes, yes, and no.

Phil Marti
Topeka, KS

<< -------------------------------------------------> << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org > << ------------------------------------------------->

#-1 08-27-2004, 10:45 PM

The lawyers and parties agree that the man has to pay 25k to
his wife to settle some credit cards. The money is to come
from the mans 401K. This is not the total amount in the
401K. Does the man have to pay taxes on the 25K and does he
have to pay the 10% penalty? He is not 59 yet. Is there any
way that he can give the wife the 20k from the 401K and she
is responsible for the Tax?

<< -------------------------------------------------> << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org > << ------------------------------------------------->

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