Allan Davis wrote:
- quote -

YOu say "IF it is necessary?" I can't imagine the
attorney for the husband letting this slip by. The Quadro
should have been automatically drawn up and integrated with
the other agreement.


- quote -

But in effect it DOES say so, when it invokes the Quadro.

- quote -

Definitely to be ironed out before filing 2004 returns.

ChEAr$,
Harlan Lunsford, EA n LA

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"Linda Dorfmont" <DORFMONT[at]aol.com> wrote:

- quote -

Except I doubt it can be treated as alimony unless the
spouse has no claim to the pension money after her death.

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

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"Allan Davis" <Allan[at]Ua-Corp.com> wrote:
- quote -

The attorney should fired for misspelling QDRO. I'd have to
review the rules for QDRO's but if form means anything, then
this was royally botched. This should never have been a
taxable event. Creating a separate qualified plan to place
the divided assets in is NOT that hard.

I don't know what the divorce decree said about the
structure of how the transaction was to be done, but to have
the husband take a direct distribution and then transfer the
money is ridiculous. I'm fairly certain that code itself
states that alternate payee (former spouse) is supposed to
receive the payments directly. Again, someone dropped the
ball here.

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

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Argggh! Attorneys! When will they admit they don't know
anything about the tax consequences of what they do to their
clients. I have (now) 2 clients who got divorced a couple of
years ago. They had this same situation because of an error
on the part of the custodian of the reitrement account. She
was supposed to get payment directly from the custodian. For
several months until the error was corrected, all the
payments went to him and he sent the proper amount to her.
Since we are all on good terms and not wanting anyone to be
treated unfairly, we all agreed that the money that he paid
her out of his retirement benefit that should have been paid
by the custodian directly to her would be treated as alimony
by both parties. It was the fairest treatment and
effeectively made the tax returns look as if the payment had
been made correctly by the custodian.

If you are on one side against the other, well, the husband
got the bad end of the deal on this arrangement. He should
fire his divorce attorney for sticking him with the taxes on
income he is not entitled to get. Her attorney is very sharp
not to complain about this arrangement. She gets the money
as property settlement (not taxable) and he gets stuck with
the taxes. The fair treatment should be as alimony until the
custodian of the retirement benefits does something about
the split of income.

Linda Dorfmont EA, CFP, CSA

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"David Woods, EA, ChFC, CLU" <dwoods[at]woods-financial.com> wrote:
- quote -

Actually the written settlement does talk about a QDRO. It
says, "If it is necessary a QUADRO (exact spelling) will be
drawn up for the pension to insure that the wife receives
these funds. The cost of the QUADRO will be shared by the
parties".

I just find it hard to believe the settlememt makes no
mention as to who pays the tax. My new client was no help
with this matter.

I tend to agree with you. At this point I believe the matter
should go back to the attorneys for clarification before any
tax returns get filed for 2004.

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Allan Davis wrote:

- quote -

As far as the IRS is concerned, I'm confident that they will
hold the HUSBAND liable for the tax. And my guess is that he
will forward the NET amount (the amount that he actually
receives, net of withholding) to your client.

But, as to which spouse ~should~ suffer the consequences of
the tax, that is a matter to be resolved in state court (if
they can't agree). I'd say there is no clear right or wrong
in a case like this since the decree was silent on the
point. However, without digging deeper into the facts of the
case, there would probably be "equity" in the notion that
the spouse receiving the money should pay (or reimburse) the
tax.

MTW

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"Allan Davis" <Allan[at]Ua-Corp.com> wrote:

- quote -

You should instruct her to FIRE her divorce attorney. The
money is taxable to the former spouse, possibly subject to
penalty based on information not provided. If by chance you
have the opportunity to speak to the attorney(s) you might
want to explain to him/her/them what a QDRO is. Unless of
course, screwing the husband was always part of the
plan.....

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

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Allan Davis wrote:

- quote -

From everything you say, this does NOT sound like a court
ordered income split (what do they call it? Quadpro..
something?)

You very simply need to have client confirm that his number
will be on the 1099R. The agreement already indicates it is
a property settlement. Just keep a copy of that agreement
for your files just in case IRS raises a question some day
in respect to ex hubby's tax return (whereon he might have
tried to deduct it as alimony.)

ChEAr$,
Harlan Lunsford, EA n LA

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A new client came to me requesting advice as to what her tax
liability will be for 2004. She was divorced in 2003 and is
receiving 100% of her former husband's fully taxable pension
plan. The monies from the plan are being sent to the former
husband and deposited into a joint checking account and then
a check is issued to my client.

Federal income tax is being withheld by the pension plan and
all indications are that a 1099R will be issued under the
former spouses social security number.

The written divorce agreement states that my client should
receive the pension proceeds and it is considered equitable
distribution and not alimony. There is no mention as to who
should pay the taxes.

How should I advise my client? If it turns out that she is
to pay the tax on the pension proceeds should it be reported
as if she received the 1099R?

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