Divorce - Settlement Assets - Bk Estate

[scirwode]

OK - my estranged husband who doesn't know enough not to look a gift horse in the mouth (but thankfully he's represented by his no kidding helpful attorney) and I are finally nearing a settlement.I've offered $70K in my retirement funds to him.Under IRS rules, he could actually cash the full amount, pay due income taxes, but not be subject to a 10% early withdrawal penalty.Or he could roll over the whole amount into his own retirement account he has thru his employer.Or he could cash out part, and roll over the balance.Or he could request yearly payments beginning at the time he receives the funds.He's still thinking over the settlement proposal - for whatever reason (it's a steal - for any soon-to-be-ex-spouse in his shoes).No matter - the problem may be that the BK trustee who is handling his Chapter 7 BK that he filed AFTER I filed the divorce action and PRIOR to the new BK reform law was enacted - has said he has a right to review our divorce settlement prior to the divorce being finalized.The BK trustee actually found a few assets and put them in the BK estate. And he actually distributed these assets - and he got a few bucks for handling the case - and he paid the balance ($1,000) to me as I had filed as a creditor for retroactive child support.However - there's a long line of creditors who got nothing from this Chapter 7 - waiting in line for any assets that the BK trustee may try and seize from our divorce settlement.Anyone have a clue whether the BK trustee would have any rights to any retirement funds that my ex would choose to cash in (an early distribution) when/if our divorce settles?I know for a fact that if I transfer my retirement funds to my ex - and they would remain retirement assets - that the BK trustee can't touch them.But if my ex were to cash them within 60 days of our divorce - as would be required if he wants to avoid the early 10% penalty - this would be literally 3 YEARS after he filed the BK petition. I say the BK trustee shouldn't have dibs on those types of assets.Anybody else have any ideas?

[claudius]

1 - As long as your ex is 59 1/2 he wouldn't incur the 10% penalty no matter what he does. If he is under 59 1/2 I believe that the only way he can avoid the 10% penalty is the distribution of periodic equal payments based on his actuarial life expentancy as per the IRS formulae (not his idea of how much a year he wants to take).2 - Your use of the word "transfer" worries me. Make sure you are using a Qualified Domestic Relations Order (QDRO). The way that works is that the custodian of the retirement fund splits the 70 into a separate retirement account in the name of your ex. Then it's your ex's account to do with as he wishes and all those options are his to choose from."Anyone have a clue whether the BK trustee would have any rights to any retirement funds that my ex would choose to cash in (an early distribution) when/if our divorce settles?"You are probably correct: as long as the money is in the retirement account, I think it's safe. Once it's out of the retirement account, I think it's just money and it is likely fair game. Your ex should be talking to his BK lawyer about it.By the way, why are you concerned if your ex screws himself up?And why are you offering 70k if he still owes child support? "But if my ex were to cash them within 60 days of our divorce - as would be required if he wants to avoid the early 10% penalty"I think that's wrong, unless he is older that 59 1/2.

[Tancred]

1. I got my information from the website: www.divorce-and-money.com/retirement.shtml An article by David Twenhafel, a certified financial and divorce planner, states that the tax code provides that money being transferred under a QDRO due to a divorce can go directly to the recipient spouse without being subject to the 10% penalty tax. These funds could then be used just as money in a savings account.2. I meant QDRO - but thanks for cautioning me regarding this.Rd "By the way, why are you concerned if your ex screws himself up? And why are you offering 70k if he still owes child support?" Good questions.The $70K I've offered is money I worked hard for. My ex and I share a beautiful daughter. If the $70K I'm offering can be spared from paying back my ex's other creditors - then there's a good chance that our daughter would benefit from at least part of my hard-earned money. The reason I'm offering the $70K is because I've been trying to negotiate and litigate and do whatever else humanly possible for the past 5+ years to get a divorce from this guy. He's fought me tooth and nail - and found lawyers willing to take his money to keep us in court and prolong the divorce by using every trick in the book.As long as he kept paying his attorneys - they kept finding ways to delay the inevitable. His legal fees are running up to $25K at present. Where'd he come up with this dough? Big time cash advances on his credit cards - then stopped payments - then filed for his Chapter 7 and got away with is; depleting his own retirement account - and a big IOU to his current attorney.So - offering him this $70K was a brainstorm I came up with this past week just before meeting with his current atty for a lengthy settlement conference. Funny thing is: Now that my husband owes his atty $5K and this figure is growing as my husband continues to balk at my most reasonable and generous offers - his own atty is tiring of his antics, and has begun to encourage a settlement.Anyway - the back child support he owes I actually worked into my proposal. He owed $20K in retroactive child support. I was paid back $1,000 from the BK estate. That left $19K. I would have owed him $28K from my retirement account based on standard equitable distribution practices. Deduct income taxes from that $28K and poof! He has paid me back the $19K balance of retroactive child support.This "$70K" windfall I'm proposing certainly isn't to my advantage, financially. If I don't offer it, he would have had to wait 10 years until I retire to collect the Majauskas share of my pension. And if he dies, or I die - guess what? He'd collect no or little pension. Possibly much less than the $70K I'm offering up front. Possible zip. But - to avoid a trial - and the turmoil involved in two spouses spewing out nasty things about each other (his would be mostly lies) in the courtroom, and to avoid the 'crap shoot' that a divorce trial actually is - as it's impossible to predict how the judge would interpret the facts (and lies) - and rule - well - and the aftermath - of a bitter, vindictive ex-husband haunting me the rest of our child's childhood when we would have to interact due to being her co-parents: Well - I would rather shell out $70K now and buy my freedom once and for all.Thanks for asking - and listening.

[Collier]

Here is how I found the article I mentioned:I put into a google search the following words:"qualified retirement account divorce new york irs withdrawal penalty:Then, it comes up with among the other responses the following:"Divorce and Retirement Assets and retirement planning: Getting the ...I also want to be specific that these four methods avoid only the 10% penalty tax for early withdrawal. Money withdrawn from a retirement account is taxable ...www.divorce-and-money.com/retirement.shtml - 30k - Cached - Similar pages"Then, I clicked on the word "cached" and found the article. I tried to cut/paste the actual url or whatever - to put in my message but it wouldn't work right.The article is actually very helpful - as well as other articles on the sponsor's website for people going thru a divorce.

[Radbert]

I browse the post that you associated with and observed it did not estimate the duty code and so I looked up the duty code and confirmed it.Hereis the hyperlink to Area 72(t)(2)(D) (which can be not, incidentally, within the 401k signal):http://www.law.cornell.edu/uscode/26/usc_sec_26_00000072----000-.htmlAnd the hyperlink to 414 (g) which identifies exactly what a QDRO is meant to become:http://www.law.cornell.edu/uscode/uscode26/usc_sec_26_00000414----000-.html#p_1It will be a great thought to publish the proposed QDRO structure for your program manager before performing and processing it simply to make certain the conditions and directions follow the structure that is suitable to that plan.I used one in my own breakup and also the program manager returned back my recommended structure with necessary changes. The program manager wouldn't have now been ready to approach the QDRO with no changes also it might have needed to return to the judge to get a do over easily had not had it examined in advance.

[Lynsey]

Yet another thing - my specific pension bill isn't susceptible to the 59 1/2 years old principle anyhow. Therefore - there might be unique guidelines for partners receiving pension resources who wish to steer clear of the 10% principle when they possess a various pension account than mine. They are able to nevertheless steer clear of the 10% - however the QDRO might have to be phrased differently.My consideration is for workers who usually retire at age 50approximately (cops) - and we absolutely aren't susceptible to the 59 1/2 principle. But we do need to retire or decide or abandon support before we are able to gather the cash with no 10% fee. After which - within 60-days of pension we've to determine how so when and just how much you want to be dispersed over our lives.

[Obrien]

Sorry - you did not discover the post on the basis of the site I supplied. Really - it had been a 'cached' post that I had been ready to pull-up thru a google research - however it particularly does state that the duty rule enables divorcing partners to make the most of the 10% fee waiver. There are specific conditions which have to become adopted, such as the processing of the QDRO.I examined using the directors of my delayed payment consideration (a 'competent' pension account) and not just did they accept this state - however they supplied me having a fill in-the-empty QDRO and also the request submission by my partner - after a merchant account is established in his title - which suggests that he'd not be asked to spend the 10% fee if he cashed within the resources within 60-days of the consideration being proven in his name.If he was smart - he Could consider just $15K out - using the okay of the bankruptcy trustee - and spend $5 in tax, make use of the $10K stability to pay for back his exceptional $10K mortgage he's against their own pension account - after which he'd have 0E in his retirement account. (Even tho he'd exhausted the resources, his consideration is composed of the inventory that's since developed 6x in worth!).Then - (easily had my druthers, this is exactly what I Would need him to complete. But I recognize I do not have my druthers) - he'd use $50K from his pension bill and purchase the hired home he lives in and which our child seems is her 'additional' house - and he'd be considered a homeowner and our child wouldn't need to proceed again. He'd have an expense - and spend no money increases if he later offered the home in a revenue. As well as in ten years when he'd settled herself back the $50K with curiosity - he'd possess a balanced pension account.But - the main reason I questioned if he cashed the entire $70K if the BK trustee could be ready to grab it - is basically because this person is not really money-smart. He loves to invest money - lots of cash. (As shown from the $90K in obligations he'd released within this BK! He submitted a prior BK before that one.) - also it could be a motivation to him easily might claim they he might 1) either money the entire amount or section of it and also have almost $50K in money open to him TODAY or 2) he might roll-over the entire quantity, or component into his pension account.My guess is the fact that he'd cash it and purchase the 'large vessel' heis usually stated he wishes - then enter more economic difficulty. Cuz around this moment - his costs are exceeding his revenue however once more!some people simply never discover. Cheers for the guidance - as well as for listening.