I am 49, terminated last year after 18 years due to restructure, am attending school to retrain for another profession. My husband has ask for a divorce and says that he is entitled to half of my 401k. This is my question. I obviously am going to have to get into this money just to survive until our house sells or whatever. I do not want to leave school, as I will graduate next year. Will I have to pay taxes and penalties on his part of the 401k also? Also since I have -0- income how will the tax part affect me? I have a little over two hundred thousand in this, and contributed most of it myself.( The company did not contribute that much.) Any advice would be appreciated? :confused:

First just because he says he is entitled to 1/2 of your 401 K, he may not be unless you just wish to settle out of court.

If two parties split everything is almost never just divided in half unless they agree on it that way.

So talk to a divorce attorney before you sign a check over to him

Next yes any money taken out of a 401 K has to pay taxes and penalties sometimes up to 10 percent. These should be paid out of the money when it is taken out ( basically have them hold the money and taxes out when you draw the money so you will not owe near as much.
Next make sure he gets only after tax money if you do give him money.

So lets say there is 100,000 and your tax rate is 25 percent, and there is a 10 percent penalty there may be only 60 K or so to get after all the fees paid.

All this should be paid though an attorney who figures all the tax liablity before payment

Bets365:

Agree with Fr Chuck about the need for negotiation and divorce lawyer to determine if husband is entitled to your 401K.

Once that is settled and assuming he does get half, you may be able to make HIM pay the taxes as this would be a distribution "from a qualified retirement plan (other than an IRA) to an alternate payee under a qualified domestic relations order." If the distribution is to an alternate payee, the Form 1099-R would have his name and SSN on it, so, logically, he would be liable for the income taxes. I am not real sure on this aspect, so you need to have your divorce lawyer check into it to see who would be liable for the income taxes.

One thing I AM sure about is that the distribution would be exempt from the 10% early distribution tax because it IS a distribution to an alternate payee under a qualified domestic relations order (in this case, a divorce decree).

Thank you very much... just finding an attorney has been pure pandamonium!
Hopefully, it will all work itself out soon.

Glad to help!

You are suffering from low self esteem. Do not let him trick you. Shop around for attorneys, and if you can find one that appeals to you, work with that one. Before he files for divorce, remove the money from the 401K, put it into travelers checks, and put them into a safety deposit box. Start secretly removing your money from your assets and converting it and hide it. Think like a man. How much of his 401K are you getting?

WHOA!!!

Do NOT touch that 401K money! Any premature withdrawal triggers tax consequences that can reach the 50% level of taxation.

Further, while I am not a lawyer, what Katiy is advocating may be illegal.

However, getting a good divorce attorney is good advice!

You are right, get with a rep and go over your account and the liabilties a divorce will have on your assets. I was wrong. And I would do it, it's my money, and I have spent money that I have had invested. I am about to do it again, rather than lose it in a law suit.