COLLECT SUPPORT PAYMENTS FROM RETIREMENT ACCOUNT: USING A QDRO
So your husband is behind on his child support or spousal support, he has no income coming in (for whatever reason) to allow the wage withholdings to collect and distribute the money to you…now what? There are many ways to still collect on back support, one of which is a Qualified Domestic Relations Order, also known as a QDRO. This is an order that is signed by the parties and the judge and then sent over to the plan administrator of a retirement account, such as a 401K or a Defined Contribution Plan. The plan administrator must then follow the order, moving funds from the support payor’s retirement account over the payee. The funds will be transferred to a deferred account of the payee.
This is a wonderful and creative way of obtaining funds, when there are no other funds available, and can be used to provide lump sum amounts. Given the tax ramifications to the payee upon withdrawal of this money from the transferred deferred account, the amount due should be “taxed up” to allow for any losses.
Prior to using this method to collect back support, it is imperative to seek advice from an attorney as well as an accountant.