hhlife Posted August 6, 2020 Share Posted August 6, 2020 My situation is like this. My ex cannot afford the child support and alimony. And the judge had a tentative decision as below. SITUATION AS BELOW ============== In light of Defendant’s current financial circumstances, Plaintiff shall receive and thereafter retain 100% of the 401K/retirement assets in Plaintiff’s name, which total approximately $100,000. Plaintiff shall utilize Defendant’s 50% share of the account for the alimony and child support obligations from the effective date of the obligations, per Paragraphs 2 and 3 of this Order, until no more funds remain in Defendant’s 50% share of the assets to cover the support obligations. When no more funds remain in Defendant’s 50% share of the retirement accounts to cover the support obligation, then Plaintiff or Defendant may file the appropriate motion with the Court at that time to address support. Within 30 days of the date of the execution of this Settlement Term Sheet, Defendant shall timely sign all documentation necessary to transfer 100% of his retirement accounts to Plaintiff. Plaintiff’s attorney shall provide Defendant with the documentation for the company that will prepare the Qualified Domestic Relations Order to transfer the retirement accounts to Plaintiff and Defendant shall cooperate and timely sign the documentation. I got confused and my questions are these: 1. He /Defendant will use his portion of 401k to pay the child support and alimony, say total $2,000 each month. The tentative settlement is that all funds will be transferred to my/Plaintiff 's account, but when I withdraw the money to use as the child support and alimony, it will trigger tax liability for me, but actually child support and alimony are non-taxable. What I mean is paying tax is ok, but that is his liability. If I pay the tax for the withdrawal, the tax should be included in his portion of 401K, which means his portion will cover fewer years for Child Support and Alimony. Can I receive the distribution from the provider each month which is grossed up with the tax that I am supposed to pay on the tax return in the future? That's to say the monthly distribution should be $2000+ tax. Is this workable? 2. Actually defendant's 50% of 401k / his portion is not sufficient to cover 10 years' child support and alimony, how can I track the remaining amount of his portion ( $50K) if 100% ($100K) of the 401k is transferred into my account ( my own 401k or ira etc) and mixed together? Is there any way that can work all these out? Link to comment Share on other sites More sharing options...
Larry Starr Posted August 6, 2020 Share Posted August 6, 2020 2 hours ago, hhlife said: Questions based below situation: 1. Defendant will use his portion of 401k to pay child support and alimony. The tentative settlement is that all funds will be transferred to Plaintiff 's account, but when Plaintiff withdraws the money from Defendant‘s portion 50% 401k as the child support and alimony, it will trigger tax liability for Plaintiff, but actually child support and alimony are non-taxable. How to solve this problem? 2. Defendant's 50% 401k, his portion is not sufficient to cover the full term of child support and alimony for 10 years, how can the Plaintiff track the remaining amount of the defendant's portion if 100% of the 401k is transferred into one account and mix together? Please advise. Thanks! SITUATION AS BELOW ============== In light of Defendant’s current financial circumstances, Plaintiff shall receive and thereafter retain 100% of the 401K/retirement assets in Plaintiff’s name, which total approximately $100,000. Plaintiff shall utilize Defendant’s 50% share of the account for the alimony and child support obligations from the effective date of the obligations, per Paragraphs 2 and 3 of this Order, until no more funds remain in Defendant’s 50% share of the assets to cover the support obligations. When no more funds remain in Defendant’s 50% share of the retirement accounts to cover the support obligation, then Plaintiff or Defendant may file the appropriate motion with the Court at that time to address support. Within 30 days of the date of the execution of this Settlement Term Sheet, Defendant shall timely sign all documentation necessary to transfer 100% of his retirement accounts to Plaintiff. Plaintiff’s attorney shall provide Defendant with the documentation for the company that will prepare the Qualified Domestic Relations Order to transfer the retirement accounts to Plaintiff and Defendant shall cooperate and timely sign the documentation. Who is writing this stuff? The law requires that money in a divorce be handled through a QDRO. It appears that your QDRO is going to transfer 100% of the participant's acct to the alternate payee (that what the last two sentences above say). Fine. But then the language in the first part just doesn't apply. If all of the participant's money in the plan (that is the defendant, yes?) goes to the ex-spouse as part of a QDRO, it is now the ex-spouse's qualified plan money (can be transferred into the alternate payee's IRA, for example) and when it comes out, it is taxable to the ex-spouse. You can't control or treat it as alimony; it is not. The reference to "defendant's 50% share" makes no sense if 100% is transferred to the ex; there no longer is ANY share for the participant. You need a competent ERISA expert to make sure what you want to accomplish is done in a way the accomplishes what you want; I don't see that in the above. Who is writing this? Doesn't look like they under the ERISA law with regard to QDRO's from what I can understand of the above, which is extremely unclear at this point. Best of luck. Luke Bailey 1 Lawrence C. Starr, FLMI, CLU, CEBS, CPC, ChFC, EA, ATA, QPFC President Qualified Plan Consultants, Inc. 46 Daggett Drive West Springfield, MA 01089 413-736-2066 larrystarr@qpc-inc.com Link to comment Share on other sites More sharing options...
DAK Posted August 8, 2020 Share Posted August 8, 2020 Any amount assigned from the participant’s account that represents child support can be paid to the child and not the alternate payee. A QDRO distribution paid to the child for child support will be taxed to the plan participant not the child or the alternate payee. Tax withholding will apply to the distribution. Larry is right. This needs clarification to be properly structured to accomplish what is intended. QDROphile 1 Link to comment Share on other sites More sharing options...
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