In a divorce a 401(k) is divided or given to the "other" spouse. How
does the early withdrawal penalty work in that case?

Thanks.


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Stu
http://DownToEarthLawyer.com


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On 1/18/23 11:31 AM, Stuart O. Bronstein wrote:

In a divorce a 401(k) is divided or given to the "other" spouse. How
does the early withdrawal penalty work in that case?

Thanks.

To avoid any tax consequences (a distribution and/or an early withdrawal penalty) there needs to be a court order dividing the plan. This is
called a QDRO (Qualified Domestic Relations Order). This determines how
much belongs to the other spouse. To access the account, the other
spouse has two options. Leave the amount where it is until such time
that the spouse owner retires or rollover the amount via a trustee to
trustee transfer to another qualified retirement account.
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Alan
https://taxtopics.net

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Tempuser <[email protected]> wrote:

Stuart O. Bronstein wrote:

In a divorce a 401(k) is divided or given to the "other" spouse.
How does the early withdrawal penalty work in that case?

To avoid any tax consequences (a distribution and/or an early
withdrawal penalty) there needs to be a court order dividing the
plan. This is called a QDRO (Qualified Domestic Relations Order).
This determines how much belongs to the other spouse. To access
the account, the other spouse has two options. Leave the amount
where it is until such time that the spouse owner retires or
rollover the amount via a trustee to trustee transfer to another
qualified retirement account.

Thanks, that makes sense. The person who contacted me thought that
giving his 401(k) account to his wife in a divorce, under a QDRO, would
mean that the wife could withdraw the money at any time without the
early withdrawal penalty. I just knew that couldn't be the case, but I
had a hard time finding an answer.

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Stu
http://DownToEarthLawyer.com


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<< ------------------------------------------------------- >>
<< The foregoing was not intended or written to be used, >>
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<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
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<< Copyright (2011) - All rights reserved. >>
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