Rollovers between spouses

[austin3515]

Husband has a 401(k) Plan with a previous employer. Husband and wife are in the process of a getting a divroce. Wife wants to receive a portion of husbands account balance as a rollover without obtaining a QDRO in the interest of accelerating the process.

Is there any way to do this? Is there a loop hole for married people that one spouse can roll to the other spouse's account?

[Appleby]

No.

A QDRO would be required to allow this.

[austin3515]

I just saw somehting that indicated that IRAs are not subject to the anti-assignment rules.

Can husband roll into an IRA and then give the money to wife - i.e, roll into her IRA?

Thanks, Appleby. I tend to think your right, but we heard of someone who somehow pulled it off without a QDRO. I know not everyone follows the rules, but I'd just as soon hear if there is another way.

Thanks,

[mbozek]

While IRAs are not subject to the QDRO rules, a tax free division of an IRA requires a court order or separation instrument. See IRC 408(d)(6). A direct transfer to another person's IRA is a taxable event. Failure to follow the rules for divison of the the IRA will result in taxation of the IRA owner because the custodian will report the transfer as a distribution. Read the IRA custodial agreement for specific rules. The money saved by doing it yourself is not worth the risk of taxation so the client should get professinal advice

[QDROphile]

Also, the husband can't roll anything over to his IRA for subsequent transfer to her IRA pursuant to court order unless the husband can get a rollable distribution from the plan.

[Appleby]

QDROphile – mind if I rephrase just to be sure we are on the same page?…Rephrasing… The husband cannot distribute assets from his qualified plan account unless he meets one of the requirements that allows him to receive a distribution from the plan, i.e. a triggering event. rephrased... There may be plans for which a QDRO is a triggering event.

Regarding rolling the assets to the IRA for the husband and then transferring it to an IRA for the spouse/former spouse… a QDRO that is issued for a qualified plan cannot be used as the basis for transferring assets from one spouse’s IRA to another. For assets to be transferred from one spouse’s IRA to another, a divorcee decree must be issued for the IRA

[Brian Gallagher]

A note on the triggering event: doesn't post # 1 say PREVIOUS employer? Does that plan have language prohibiting a distribution before retirment or something?

[QDROphile]

Appleby:

I was embellishing mbozek's comments about IRAs. If there were a QDRO, you would not have to talk about IRAs because the QDRO would provide for distribution to the AP and the AP could roll over to her IRA.

My point was that you don't even get to talk about using IRAs in lieu of a QDRO unless the participant is eligible for a distribution so the participant can start the process with a distribution that is rolled to his IRA. Then you have to go to mbozek's comment about the requirements for transfers from one IRA to another.

By the way, I have yet to see a plan that made a QDRO a distribution event for a participant. Although possible under unusual circumstances, it would make the unusual even more odd.

[Guest Pensions in Paradise]

QDROphile - I've seen volume submitter plans and at least one prototype plan (Corbel PPD) which state that a QDRO is a distributable event.

[WDIK]

Pensions in Paradise:

Does the document language you refer to state that a plan participant is entitled to an immediate distribution if a QDRO applies to his/her benefit, or rather does it indicate that the alternate payee may receive immediate distribution of his/her segregated benefit?

[Guest Pensions in Paradise]

Alternate payee

[WDIK]

I read QDROphile's comment on plan language as pertaining to the plan participant. This also ties in with his earlier statements about the "husband" not being able to roll over unless there is a distributable event.