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Loren, Lawyer
Category: Family Law
Satisfied Customers: 34438
Experience:  30 plus years of experience.
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As part of a divorce settlement, my ex is requesting money

Customer Question

As part of a divorce settlement, my ex is requesting money that I will have to withdraw from my 401K plan paying a penalty and tax if it is paid in a lump sum in lieu of alimony. Will she have to pay tax on the monies or that have to be a part of the agreement. She will not take a roll over into an tax deferred IRA.
Submitted: 1 year ago.
Category: Family Law
Expert:  Loren replied 1 year ago.

Good afternoon. I am Loren, a Florida licensed attorney, and I look forward to assisting you.

Expert:  Loren replied 1 year ago.

If your wife takes the money in cash, rather than rolling it directly into an IRA plan of her own, she has 60 days to deposit the amount into a retirement account. After that, she must pay taxes on it as ordinary income. If she hasn’t yet reached age 59½, she, not you, will be subject to the 10 percent penalty unless she receives a special exemption from the IRS. For example, if she is disabled, she’s not subject to the penalty. She won't have to pay it if she uses the funds toward tuition for herself or a dependent, or if she uses up to $10,000 of it as a down payment to buy a home. She would still have to pay income tax on it, though.

Expert:  Loren replied 1 year ago.

Did you have further questions? Have I answered your question?

Expert:  Loren replied 1 year ago.

If you have no further questions please remember to rate my service so that I am credited by JA for answering your question and also so that I may close the question. Thanks.