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  • Early Withdrawal Penalty

    From Stuart O. Bronstein@21:1/5 to All on Wed Jan 18 14:31:02 2023
    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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  • From Tempuser@21:1/5 to Stuart O. Bronstein on Wed Jan 18 15:07:49 2023
    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.
    --
    Alan
    https://taxtopics.net

    --
    << ------------------------------------------------------- >>
    << The foregoing was not intended or written to be used, >>
    << nor can it used, for the purpose of avoiding penalties >>
    << that may be imposed upon the taxpayer. >>
    << >>
    << The Charter and the Guidelines for submitting posts >>
    << to this newsgroup as well as our anti-spamming policy >>
    << are at www.asktax.org. >>
    << Copyright (2011) - All rights reserved. >>
    << ------------------------------------------------------- >>

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  • From Stuart O. Bronstein@21:1/5 to Tempuser on Wed Jan 18 21:27:00 2023
    Tempuser <tempuser@vacationmail.com> 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.

    --
    Stu
    http://DownToEarthLawyer.com


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    << ------------------------------------------------------- >>
    << The foregoing was not intended or written to be used, >>
    << nor can it used, for the purpose of avoiding penalties >>
    << that may be imposed upon the taxpayer. >>
    << >>
    << The Charter and the Guidelines for submitting posts >>
    << to this newsgroup as well as our anti-spamming policy >>
    << are at www.asktax.org. >>
    << Copyright (2011) - All rights reserved. >>
    << ------------------------------------------------------- >>

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