# QDRO and 401K



## BlueDragon (Feb 4, 2013)

For a separation/divorce how does a QDRO work?
I've got about 115k currently in my 401K
28K of it is in loans.

I'm planning to separate in the next few months. I'm looking for a new place to live now.
What are the options for the 401K? 
I plan to move out and leave her the home once the streamline is completed. This will reduce the monthly payment about 300
I need to find a roommate to split an apartment with, otherwise I can not afford it
For my 401K, I heard I need a QDRO. So if I take the 115K and divide it by 2. That's 57500 she will recieve.
This QDRO stops the penalty for her correct?
Can I give her the 57500, and state she needs to give me 14K of it for 1/2 of the loans?
Can I disburse my 401K 100%, and make her give me 1/2 of that. This would allow me to obtain a place of resident's and remove any financial burdens with the divorce
And she can also do the same with her half.

I know wiping one's 401K plan is not a good option. But if it is possible it will relieve the financial burden associated with a divorce.


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## jd08 (Nov 20, 2012)

A QDRO or qualified domestic relations order is used to divide a pension or 401k. 

First you (or she since she's getting the money) would need an experienced attorney to draft a QDRO. They are highly technical documents and shouldnt be attempted without legal help. 

Second, how the loan balance is treated will be determined by the terms of the qdro. It will either say her share is subject to the loan balance or not. For instance if you gave her 50% subject to your loan balance then her 50% share would actually be $43,500.00. If not subject to the balance her share would be $57,500.00. An attorney representing her would obviously not want to include the loan balance in her share. 

As for being
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## jd08 (Nov 20, 2012)

Sorry got cut off... As for being penalty free, a qdro can have no tax consequences for the receiving spouse but there is certain specific language that must be included in the qdro. She must roll the proceeds directly over into an IRA within 60 days of the date of distribution to avoid tax consequences. Unless "magic language" is used though there is going to be a 20% income tax withholding off the top of the transfer for your spouse. If she doesn't roll over and takes the cash as an early distribution then the 20% withholding will apply in addition to possibly more taxes depending on her tax bracket. 

Bottom line is you and your spouse need to consult attorneys regarding the transfer of retirement assets. There's a lot more I didnt cover - it's a complicated topic.
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## Feynman (Dec 18, 2012)

My 401k administrator had a QDRO template I simply filled out, got notarized, filed with the court, and sent to the administrator. Saved 300-400 in attorney fees.


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