austin3515 Posted May 30, 2017 Posted May 30, 2017 But there is a catch here. It is the fiancée's house. She lives with the fiancée but the mortgage is not in her name. The distribution at the most broad level is to prevent the eviction. "(4) Payments necessary to prevent the eviction of the employee from the employee's principal residence or foreclosure on the mortgage on that residence;" Based on a literal interpretation of the regs it seems to me she would qualify. Austin Powers, CPA, QPA, ERPA
Belgarath Posted May 30, 2017 Posted May 30, 2017 I keep waffling on this. I can see arguments for both sides. Of course she'd have to show that the "need" can't reasonably be relieved otherwise, but assuming she can, I don't really see that it is much different than if she were renting and was about to be evicted. Maybe I'm just getting soft in my old age.
austin3515 Posted May 30, 2017 Author Posted May 30, 2017 Belgarath, my understanding is that for needs we can rely on the participant's representations unless we have actual knowledge to the contrary. What do you think? Austin Powers, CPA, QPA, ERPA
DMcGovern Posted May 30, 2017 Posted May 30, 2017 It seems this is a question of whether or not the house is considered the participant's principal residence. ERISA does not provide a legal definition for "principal residence". If we look at tax law, Treas Reg Sec 1.121-1 refers to the property held (as in owned and paid for) by the taxpayer. Facts and circumstances may come into consideration. Does the fiancee have any ownership in the property? Does the fiancee pay any taxes? Or, is there a rental agreement? I think there may be a difference between an eviction notice for a place you are renting, and a person living with you. Unless there is some sort of contractual agreement between the two parties, doesn't the eviction notice only apply to the person(s) named in the notice - and their legal immediate relatives (spouse, children, parents, etc.)
Belgarath Posted May 30, 2017 Posted May 30, 2017 That's one of the arguments for the "other side" that I considered. But it seems pretty clear that if fiancée gets evicted, she will too - hence my comment about being similar to renting. Austin - while I normally agree, I'd be a little more conservative on this one, only because it is pushing the edge of the envelope already.
austin3515 Posted May 30, 2017 Author Posted May 30, 2017 Well that is a totally different purpose, in that case the cited regs deals with whether or not you can exclude a capital gain on the sale of your home from income. Obviously there is no rental agreement between the lovebirds :) I'd still be single if I made my wife sign a lease on the condo we lived in while engaged! I just think maybe you are putting rules into the reg that just are not there. It just doesn't mention anywhere a requirement that the participant be the owner of the property. Because living somewhere you do don't own (or perhaps if you';re name is not on the lease) happens ALL the TIME, it seems to me that we give them credit that they considered adding this requirement and simply opted not to. Austin Powers, CPA, QPA, ERPA
BG5150 Posted May 30, 2017 Posted May 30, 2017 What address does she put on her taxes? QKA, QPA, CPC, ERPATwo wrongs don't make a right, but three rights make a left.
RatherBeGolfing Posted May 30, 2017 Posted May 30, 2017 I'm normally very conservative when it comes to gray areas, but in this case I agree with Austin that she could qualify even though the mortgage is not in her name. As mentioned above, people live in places they don't own all the time, and that shouldn't prevent them from getting a hardship distribution. If she is not on the mortgage, what address is listed on her drivers license? Her tax return? Voter registration? does she receive mail there? Are any utilities in her name? I think any of the above could be used to show that it is the participants principal residence for hardship purposes.
BG5150 Posted May 30, 2017 Posted May 30, 2017 Tell them to go the the courthouse this week and get hitched. QKA, QPA, CPC, ERPATwo wrongs don't make a right, but three rights make a left.
Belgarath Posted May 30, 2017 Posted May 30, 2017 Austin - in case it wasn't clear, this portion of my last post was regarding the participant's representations only - not whether the withdrawal is otherwise available or not. "Austin - while I normally agree, I'd be a little more conservative on this one, only because it is pushing the edge of the envelope already."
austin3515 Posted May 30, 2017 Author Posted May 30, 2017 Thanks for the clarification Belgarath! Austin Powers, CPA, QPA, ERPA
david rigby Posted May 30, 2017 Posted May 30, 2017 Not dispositive to the original question, just a reminder that pronouns sometimes need clarity (ie, "she" and "her"): fiancée = a woman engaged to be married. fiancé = a man engaged to be married. hr for me 1 I'm a retirement actuary. Nothing about my comments is intended or should be construed as investment, tax, legal or accounting advice. Occasionally, but not all the time, it might be reasonable to interpret my comments as actuarial or consulting advice.
austin3515 Posted May 30, 2017 Author Posted May 30, 2017 yeah I did not know that! Austin Powers, CPA, QPA, ERPA
pmacduff Posted June 1, 2017 Posted June 1, 2017 it's late in the day and I just have to add my two cents...if the house is in foreclosure and they aren't married yet what's going to happen in the future?! I think I would be running fast the other way or at least postponing the wedding for a very long time
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