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  1. #1
    helpmeIamprose is offline Junior Member
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    what is a Quadro Order?

    What is the name of your state? New Jersey
    what is a Quadro Order and how does it work with respect to equitable distribution of pensions? is there any way of getting the money up front?
    Thanks for your comments.
  2. #2
    Silverplum is offline Senior Member
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    Quote Originally Posted by helpmeIamprose View Post
    What is the name of your state? New Jersey
    what is a Quadro Order and how does it work with respect to equitable distribution of pensions? is there any way of getting the money up front?
    Thanks for your comments.
    QDRO = Qualified Domestic Relations Order. Use that info to google because QDROs are VERY COMPLICATED.
  3. #3
    LdiJ is offline Senior Member
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    I agree that QDROs are complicated and that you need to do some research.

    However, I will add that if the retirement fund in question is one where distributions can be made, then once the QDRO is completed you would be able to access the funds.

    HOWEVER, there would be serious tax implications to accessing the funds.

    If you prefer/need up front cash, then you may want to consider trying to take a greater share of another or other assets, in exchange for NOT taking a share of the retirement account.

    For example, if your home has significant equity, you might take a greater share of the home equity in exchange for giving up your share of the retirement account.
  4. #4
    Bali Hai is offline Senior Member
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    Quote Originally Posted by LdiJ View Post
    I agree that QDROs are complicated and that you need to do some research.

    However, I will add that if the retirement fund in question is one where distributions can be made, then once the QDRO is completed you would be able to access the funds.

    I believe you meant CONTRIBUTIONS, and if so:

    That is not correct. Those non-company contributiions are restricted per the plan whether before or after the QDRO. You don't just walk into the office and say give me my money in my hand after the QDRO has been executed! The person who didn't work or contribute to the plan is under the same restrictions as plan participant!! In other words "access to the funds" has the same restrictions AFTER the QDRO as it did BEFORE the QDRO!!

    Access is you either borrow against the funds or you claim a hardship where the tax implications would come into play as you have suggested.

    You of all people should know this!


    HOWEVER, there would be serious tax implications to accessing the funds.

    If you prefer/need up front cash, then you may want to consider trying to take a greater share of another or other assets, in exchange for NOT taking a share of the retirement account.

    For example, if your home has significant equity, you might take a greater share of the home equity in exchange for giving up your share of the retirement account.
    And the holder of the 401k would figure tax free equity vs. what they would pay when taking a distribution when calculating the equity and adjust the equity amount paid out accordingly.
    Last edited by Bali Hai; 09-14-2007 at 08:58 PM.
  5. #5
    LdiJ is offline Senior Member
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    Bali,

    1) A QDRO, properly done, divides the account into two separate accounts, one for each party. Therefore, there are no taxable ramifications of the division, only taxable ramifications when money is withdrawn (distributed). There can be some specific exception to that, like railroad retirement, which has a social security element, but those exceptions are relatively few.

    2) No, I didn't mean "contribution", I meant "distribution". I said "if the retirement fund in question is one where distributions can be made", which means if its possible to withdraw money from the retirement account. Therefore, I was indicating that not all retirement funds allow withdrawals prior to retirement.
  6. #6
    Bali Hai is offline Senior Member
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    Quote Originally Posted by LdiJ View Post
    Bali,

    1) A QDRO, properly done, divides the account into two separate accounts, one for each party.

    Correct, AND, EACH party is bound by the restrictions as the original party holding the retirement account! Agreed or not??

    Therefore, there are no taxable ramifications of the division, only taxable ramifications when money is withdrawn (distributed).

    Don't double talk me Mom, EVERYBODY knows that!!

    There can be some specific exception to that, like railroad retirement,

    Are we talking about railroad rertirement or not??

    which has a social security element, but those exceptions are relatively few.

    2) No, I didn't mean "contribution", I meant "distribution". I said "if the retirement fund in question is one where distributions can be made", which means if its possible to withdraw money from the retirement account.

    And my rebuttal is; It is POSSIBLE to to take a distribution from ANY retirement account, WITH RESTRICTIONS IF!!!

    Therefore, I was indicating that not all retirement funds allow withdrawals prior to retirement.
    ANY retirement accounts these days DO NOT allow early withdrawls (whether a QDRO was executed or NOT) without significant penalities.
  7. #7
    tuffbrk is offline Senior Member
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    So help me out Bali -On the early settlement proposal rec'd from my STBX the retirement account and 401K (both mine) are noted simply as QDRO. What would a "good" QDRO say? My 401K allows for withdrawal (with penalty of course) as a result of a divorce. I do not choose to give up my portion of the sale proceeds from the house - when they finally let me market it as I need some liquid funds. So how do I make sure that the STBX absorbs the taxes and penalties for opening up the accounts for distribution?
  8. #8
    LdiJ is offline Senior Member
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    Quote Originally Posted by tuffbrk View Post
    So help me out Bali -On the early settlement proposal rec'd from my STBX the retirement account and 401K (both mine) are noted simply as QDRO. What would a "good" QDRO say? My 401K allows for withdrawal (with penalty of course) as a result of a divorce. I do not choose to give up my portion of the sale proceeds from the house - when they finally let me market it as I need some liquid funds. So how do I make sure that the STBX absorbs the taxes and penalties for opening up the accounts for distribution?
    You DO NOT withdraw the money and hand it over to her. You draw up a QDRO that divides the money into two separate accounts, one for her, and one for you. Then, if she chooses to withdraw the money from her account, the taxes are her responsibilty.

    However, there is no tax penalty if retirement funds are withdrawn in connection with a divorce settlement.
  9. #9
    Bali Hai is offline Senior Member
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    Quote Originally Posted by LdiJ View Post
    You DO NOT withdraw the money and hand it over to her. You draw up a QDRO that divides the money into two separate accounts, one for her, and one for you. Then, if she chooses to withdraw the money from her account, the taxes are her responsibilty.

    However, there is no tax penalty if retirement funds are withdrawn in connection with a divorce settlement.
    This is where you are losing me. Can you give an example (and maybe several examples would help clear things up) of where retirement funds are withdrawn in connection with a divorce settlement with no tax penality???

    I would appreciate a straight forward, non-double talk answer from you.
  10. #10
    helpmeIamprose is offline Junior Member
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    the judge allowed me to invade her 401k to get an attorney and wrote in the order that I be responsable for any taxes or penalities to her.
  11. #11
    Bali Hai is offline Senior Member
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    Quote Originally Posted by tuffbrk View Post
    So help me out Bali -On the early settlement proposal rec'd from my STBX the retirement account and 401K (both mine) are noted simply as QDRO. What would a "good" QDRO say?

    The only "good" QDRO is one where the lazy spouse who did not work or contribute to that account, walks away with half of it....

    My 401K allows for withdrawal (with penalty of course) as a result of a divorce. I do not choose to give up my portion of the sale proceeds from the house - when they finally let me market it as I need some liquid funds. So how do I make sure that the STBX absorbs the taxes and penalties for opening up the accounts for distribution?
    You lost me...What does splitting a retirement account have to do with equity in the house?
  12. #12
    tuffbrk is offline Senior Member
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    I was told in NJ that it's always a 50/50 split. My comment on the equity was related to the advice that it may be better to give up liquid assets so as to not have to open up the 401K or retirement accts. I don't care if it gets opened up - I just want to make certain the tax implications, penalties, etc. are absorbed by him, not me...
  13. #13
    LdiJ is offline Senior Member
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    Quote Originally Posted by Bali Hai View Post
    This is where you are losing me. Can you give an example (and maybe several examples would help clear things up) of where retirement funds are withdrawn in connection with a divorce settlement with no tax penality???

    I would appreciate a straight forward, non-double talk answer from you.
    Ok...someone has a 401k with company B for 100k.

    The court orders that the spouse gets 50% of the 100k, however the company's plan will not accomodate the account being split into two different accounts, (which would be unusual) therefore 50% of the money has to be withdrawn from the account and given to the spouse by check.

    That creates a taxable event for the original holder of the 401k, but per the tax code the 10% early withdrawal penalty is waived. The person files form 5329 with their tax return and chooses exception number 6 on line 2.

    Second example

    Same scenario however the company's plan allows for the original 401k to be split into two separate accounts. One for the original account holder and one for the spouse.

    The spouse then decides to withdraw the money from the account and close it....or perhaps even the company plan requires her to do that.

    That means that the 1099-R will be issued in HER name, rather than in the name of the original account holder, and she would be responsible for any taxes, but again, there will be no 10% early withdrawal penalty and form 5329 should be used. However, that only applies in the year of the divorce. If she leaves the money in the account or rolls it over into another account and then withdraws it several years later, there would be a penalty.

    In both scenarios they have to pay regular income tax on the withdrawal (which they would have to do even after they retired), but there is no penalty.

    Bali,

    If you had this happen, and you got a 1099-R, and you did not include form 5329 with your return (choosing exception number 6), then you can still amend your return to get the penalty money back, as long as it wasn't an earlier year than 2004.
  14. #14
    tuffbrk is offline Senior Member
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    I guess we really hijacked this thread! So then - either way, I dont' get stuck paying a penalty. So I check to see what the company accomodates, then any disbursement doesn't result in a tax penalty as long as it is completed within -I'm presuming- the calendar year in which the divorce was granted. I'd also guess if the divorce was at the end of December, some type of allowance is made that carries the waiver to the following year... Think I've got it! Thanks much!
  15. #15
    LdiJ is offline Senior Member
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    Quote Originally Posted by tuffbrk View Post
    I guess we really hijacked this thread! So then - either way, I dont' get stuck paying a penalty. So I check to see what the company accomodates, then any disbursement doesn't result in a tax penalty as long as it is completed within -I'm presuming- the calendar year in which the divorce was granted. I'd also guess if the divorce was at the end of December, some type of allowance is made that carries the waiver to the following year... Think I've got it! Thanks much!
    Actually, I should change that slightly....as long as it happens in the year that the QDRO is executed (which is usually the year of the divorce, but might be the next year if the divorce is final late in the year).

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