Tax question re: alternate payee

[Guest cdg]

My ex is retired receiving pension. His company will not send payment to me since no quadro was filed on my behalf before he retired. It was listed in my divorce order but attorney did not file anything. Went to court and judge gave order for my ex to pay me directly cash payment each month. Can anyone tell me if my ex can substract amount he pays me from gross income. give irs

my ss and address and then I claim it as ordinery income. Ex want s to take his taxes out at his tax rate before he pays me check. HE is in highest bracket so not much will be left to send if he does that. I need documentation of how this can be done without losing a big % of my share.

[david rigby]

Sounds like you both need some tax advice.

The pension plan cannot send anything directly to you without a Qualified Domestic Relations Order (QDRO). Highly unlikely that a divorce order would also consititue a QDRO. That is, the divorce order likely tells him to pay you, but it does not tell the plan to pay you. If he is not paying you, then your attorney should probably seek judicial enforcement, depending on the laws in your state.

It may be possible to have the court issue a QDRO, even though he has already retired. You should probably anticipate some attorney costs, but maybe you can make him pay that. Highly unlikely that such a QDRO would be retroactive.

By the way, the common advice given around here is that if your attorney does not know the meaning and importance of a QDRO, then you need a new attorney.

[QDROphile]

It may be possible that under the rules applicable to taxation of property division and payments in a divorce you would be the one to include the payments you receive in taxable income and your ex-spouse may be able to exclude the amounts. But you need expert advice on the subject. Even if true, it would probably be better to get a QDRO, because then the tax reporting would be much more simple and direct, plus you won't have to rely on your ex to forward the payment to you each month. That is worth something all by itself.

If you go to another lawyer to help with this, you should also discuss whether or not to claim against your first lawyer for malpractice. A divorce decree that provides for division of retirement benefits needs appropriate follow-up to be effective.

Your first lawyer might simply need a gentle reminder that the job is not yet done.

[Guest cdg]

Thank you for your reply. I am definitely planning to file a claim for malpractice. Because no QUADRO was filed on my behalf I lost my rights to benefits in case of my ex-husbands death. I have incurred expenses of over $2000 so far in trying to get a QUADRO filed with the court. We go to court again in April for the judge to decide how the tax conquesences will be divided, since my ex is paying a check to me each month directly. The lawyer that did my divorce is well aware that he did not finish the job. However, I

did not know that he was responsible until I was already using another Attorney in his office. The Attorney Iam useing became the old lawyer's wife. (I know it sounds like a soap opera) Anyway once I started dealing with her I didn't want to make malpractice noises until this Quadro thing was finished.

MY next question is , "How do I find a good Attorney that will help with a malpractice claim"? Attorneysgenerally do not want to go against each other.

[mbozek]

cdg: why do you care if your ex pays taxes on his payments? If he paying taxes on the payments then you get them tax free. Ct could reduce amount of his payment to u to take that into account. Generally court cannot issue qdro after benefits payments start. Issue is whether ct has jurisdiction to order payments after divorce/ property settlement has been finalized and agreed to by both parties. This issue is similar to cases where spouse's attorney overlooks retirement benefits in divorce settlement. Good luck.

[QDROphile]

1. It is not true that QDROs cannot be issued and effective after payments start. How they can apply is often different after payments start. State law is a concern. The court may not be able to issue an order or change a settlement after a procceding is closed. That will vary from state to state and circumstance to circumstance.

2. You have various sources for referral to lawyers who will prosecute a malpractice claim -- some are on the internet and I will vouch for none. It is very difficult to know if you are getting a good steer. Some state and local bar associations provide referrals and may provide other assistance through their lawyer discipline or client protection programs.

[mbozek]

the following issues trouble me: In this case the benefits have already started and I do not believe that the plan options include an annuity to 2 persons at the same time based upon one persons life expectancy. Second providing an annuity to the spouse based upon her life expectancy after benefits commence would increase the cost to the plan. Third I don't know if the court retained jurisdiction over the plan retirement benefits after the divorce decreee was issued.

[QDROphile]

mbozek:

You are correct that a plan does not have to provide an annuity option to an alternate payee after the benefit starting date. The alternate payee may have to be consoled with receiving a portion of each payment that is made under the form of payment in effect. But a QDRO is still available to provide direct payments to the alternate payee. Entering the QDRO after the payment starting date reduces the options and eliminates some important protections, such as protection against the participant's death. There is a new case that says that a court can enter a QDRO after the death of the participant. Not the same circumstances that we are discussing. The validity and effect of that decision have yet to be worked out. You are also correct that state law may affect the options at this point. State law may also provide a remedy against the participant for starting benefits in a manner contrary to the intent of the decree (if any one had any intent or thought in the first place).

[Guest b2kates]

Your question is now about divorce taxation.

Not legal advise-- normally alimony is tax deductible to the payor and income to the payee. That means your ex gets full value for what he is paying you. And you have to pay tax on what you receive, at your personal rate.

I agree, with prior posts, a QDRO can generally be issued at any time. only a plan problem if the plan has made complete distribution of his benefits.

[mbozek]

I think this is a matter for the attorneys and tax lawyers to resolve.