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Jax Tax
Jax Tax, Tax Attorney
Category: Tax
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Experience:  JD, LL.M in Business and Taxation, IRS Enrolled Agent. Expert in Business and Tax Transactions
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Son-in-law in jail awaiting sentencing - maybe life for molesting

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Son-in-law in jail awaiting sentencing - maybe life for molesting oldest child. He has a 401K that he wants to cash out for attorney fees/counseling. His mother already put about $20K. Daughter working, low pay, 3 children at home ages 18 and 16. No savings, barely making it since his arrest. Family has no transportation. She is worried about the taxes she will have to pay for early withdrawal. He worked for Dish for about 7 years, don't expect 401K balance to be much, but she has no idea. She plans to divorce after the case is settled and he is sentenced. Unpleasant situation. Mother-in-law applying pressure for her to get Power of Attorney and request distribution for his use. He is in jail in CA - she is living in Kingman AZ. He "generously" says she can have $2K to get a used car before winter comes. Question - if she gets Power of Attorney can she have taxes withheld at time of distribution? Isn't she entitled to half of the distribution? Is she liable for any new bills he accrues, ie. legal, counseling? Should she file for divorce, or at least legal separation now and if so she can file separate return. Worried mom in Texas

Jax Tax : First, she does not have a right to his retirement as it currently stands. Maybe a divorce order would state such, but no, she has no current right. If it is going to be cashed out, I'd file legal separation now so to be filing single gong forward so not tax obligations for the withdrawal is on her regarding the tax. Then a withdrawal even if not tax was withheld would be on him. Of he can't file and pay, who cares he will be in jail. Unless he has a lot of assets, of just will never be paid..
Jax Tax : As for having power of attorney, this creates a legal duty of care. If you have the account withdrawan, you should have taxes withheld as part of your fiduciary duty unless he demands otherwise in writing or some other fact or circumstance demands otherwise.
Jax Tax : Again, divorce is a good idea in a community property state to avaood liability of a spouse but the divorce cannot be a sham only to avaood responsibility.
Jax Tax : As his wife, she could be on the hook for his liabilities.
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