Anyone with 401K/divorce experience?

Old 04-10-2013, 06:16 PM
  # 21 (permalink)  
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Originally Posted by LexieCat View Post
You are PAYING this lawyer to advise you. Tell him or her you want an explanation for the 28 percent. Ask him or her to give you the law or regulation that governs it. "This is how it's done" doesn't cut it.

Alternatively, if you don't want to pay the lawyer for the time it may take to answer the question, contact the fund manager and ask that person. Ask if there is some reason for a 28 percent deduction when the account is split in this manner.
It shouldn't take the lawyer more than a .1 billable hour to send you the governing regulation in an email. Demand the law. Then see if reading it helps you. Although, I am a lawyer, and that QDRO stuff makes my head spin- so then ask this fellow to walk you through it, if you need.

Best of luck.
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Old 04-10-2013, 07:06 PM
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Originally Posted by Archangelesk View Post
It shouldn't take the lawyer more than a .1 billable hour to send you the governing regulation in an email.
Agreed. I'm a lawyer, too, though questions like this are not my area of expertise. I'm just envisioning a scenario where the lawyer doesn't know the answer (which shouldn't be the case), maybe is doing what he or she has been told, and has to spend time researching the answer. Shouldn't happen, but I know it does.
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Old 04-10-2013, 07:27 PM
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I am not a lawyer. But I figured out a coap (equilavent to a quadro) court order approved for processing (it's a federal thing).

I think you should just ask attorney for explanation of the 28%. Still think it is for taxes, even though no taxes are paid on a rollover. It doesn't matter if he is rolling it over to you. Just make sure that you do not see the money and that it is rolled over into you IRA or 401K.
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Old 04-11-2013, 03:48 AM
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I'm not a lawyer but I've been divorced twice. That kinda makes me an idiot in some peoples opinion so take my advice at your own risk.

Read up (for free on the internet) about your state guidelines on separation of assets. Remember these are guidelines, or a starting point for negotiations. The two of you can agree to anything with or without lawyers involved. If you can't agree then a judge will settle it using the state guidelines unless one or the other has a compelling argument to NOT use the state guidelines, (very rare).

Hint: It's a whole lot cheaper to agree on a settlement without using lawyers billing at $350/hr.
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Old 04-11-2013, 04:07 AM
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There's been a small amount of lawyer bashing here but I just want to say that taking legal advice was the best thing I ever did for my divorce settlement, and saved me a lot more than it cost.
The tone of the settlement still rests with you.
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Old 04-11-2013, 06:01 AM
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LOL, as a member of that much-maligned profession, I can say after over a quarter of a century dealing with hundreds/thousands of lawyers, there are plenty of good ones, and more than a few who can make any proceeding more difficult and unpleasant than it needs to be.

Anytime a lawyer is not performing well, or in your best interest, or refuses to provide information or answer questions, it's time to think about finding a new lawyer. The good ones can be worth their weight in gold, but the bad ones can do a lot of damage.
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Old 04-11-2013, 08:34 AM
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Originally Posted by LexieCat View Post
LOL, as a member of that much-maligned profession, I can say after over a quarter of a century dealing with hundreds/thousands of lawyers, there are plenty of good ones, and more than a few who can make any proceeding more difficult and unpleasant than it needs to be.

Anytime a lawyer is not performing well, or in your best interest, or refuses to provide information or answer questions, it's time to think about finding a new lawyer. The good ones can be worth their weight in gold, but the bad ones can do a lot of damage.
Agreed. And I think you may be right about the possibility that he or she did not know off-hand. Send an email and just ask that the lawyer attach the law or regulation.

By the way- each state has a committee that investigates complaints regarding attorneys. Usually, you can file a complaint online.
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Old 04-11-2013, 11:19 AM
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Originally Posted by 24Years View Post
The cash is going to be rolled into my 401K, and the lawyer knows this (I'm not withdrawing any cash). We are in the 28% bracket but I still don't get this. I may need to call another lawyer for advice as I don't know how else to have a better idea unless someone is familiar if each state may have different laws (I'm in Wisconsin).
I may be wrong, but I work in the financial industry & my understanding is that you CAN'T roll a 401K to a 401K because those plans are actually separate entities set up by the sponsoring employer & not the same type of retirement structure as say, an IRA account.

You SHOULD be rolling from his 401K to a Traditional IRA account in your name. (I've done a few of these for a divorce settlement) And once the funds are received you will likely have to have them reinvested... many times the funds offered in the existing 401K can't just be transferred in-kind & must be liquidated & then the cash proceeds are distributed. If they INSIST that it has to remain under his 401K plan but in your name, you'll have greater restrictions on investment choices, future distributions, etc. In an IRA you are in the driver's seat & have much more control over it all around. The rules are very different for these plans so it may really benefit you to discuss all of this with a financial planner. You would want someone who is more than just a broker - preferably A CFP (Certified Financial Planner) who has some experience with all sides of this - 401K plans, divorce settlements, tax law.

The 28% makes no sense to me either, except in the case where it represents his investments made during a time outside of your marriage (before or after). Even if it relates to your joint tax bracket, it should not factor into the distribution because once divorced you file your tax returns as inividuals & your individual tax rates may be different. (even likely) Why would they essentially be holding a % to pay HIS taxes (in the future mind you, he'd owe nothing due to the divorce distribution) but not yours?
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Old 04-11-2013, 01:12 PM
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Maybe your lawyer is saying 28% remains in your husband's plan because he will pay taxes on it when he withdraws it, including your share as part of the settlement?
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Old 04-11-2013, 01:52 PM
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Originally Posted by Jazzman View Post
Maybe your lawyer is saying 28% remains in your husband's plan because he will pay taxes on it when he withdraws it, including your share as part of the settlement?
I don't think so, once the asset is split they each handle distributions separately..... this one-time split doesn't play into future distributions from either account.

So if/when he withdraws in the future, his tax due will depend on his personal tax rate & income for that year... it has no impact on her at all, then or now.

Vice versa too - whenever she decides to make withdrawals her tax due will be calculated on her individual tax rate & he doesn't factor into it at all.

I'm very curious to hear what this relates to.... I've been puzzling over it all day!
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Old 04-14-2013, 04:20 PM
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I told my lawyer that it is not my undertstanding after speaking with the 401k representative that 28% needs to be taken out and asked him to show me the law regarding this. I will keep you posted once I find out his answer.
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Old 04-17-2013, 08:29 PM
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My lawyer's response was, "if I said that, I was mistaken." OMG...really? I've had the impression my lawyer has worked with many divorces, so I would think the 401K is fairly common in a divorce (?). I am not sure what to think. I had the impression he was trying to cover up because he gave me a long, drawn out explanation of circumstances of why I would have to pay taxes. I interrupted him and said none of what he was saying applied to me since I would be rolling over the 401K. He said, yes, that is true. ...my divorce is in 2 weeks so if you're inclined toward prayer, please pray for me. I believe in the power of prayer...just didn't think I would be asking for it while feeling uncertain about my lawyer! Here's hoping it gets better from here on out.
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Old 04-17-2013, 08:56 PM
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24Years,

I will be praying for you, for sure.
I do not know anything about 401s, but if my attorney did not know I was not liable for taxes, that would concern me.
Is this being hashed out in paperwork? Can you see what has happened with your case so far? Your file?

Beth
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Old 04-17-2013, 09:16 PM
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my divorce is in 2 weeks so if you're inclined toward prayer, please pray for me.
Look what you found out in 3 days 24Years! yes, keep praying, but keep your eyes open.
he was mistaken? about 28 percent?

I had the impression he was trying to cover up because he gave me a long, drawn out explanation of circumstances of why I would have to pay taxes
Okay, i think you are right. usually, we of the codependent type (smiling here) can read people very well. we just don"t want to believe badly in people. what is your gut telling you?
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Old 04-17-2013, 09:46 PM
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Originally Posted by FireSprite View Post
I may be wrong, but I work in the financial industry & my understanding is that you CAN'T roll a 401K to a 401K because those plans are actually separate entities set up by the sponsoring employer & not the same type of retirement structure as say, an IRA account.
You are wrong. 401(k)s are governed by federal regulation, so by nature they are the same type of retirement structure. Many employees who change employers simply roll their 401(k) from their previous employer to the one offered by their new employer. Chances are the new employer will not have the same investment options so the holdings in the first 401(k) will need to be liquidated prior to transfer (this is as opposed to a direct transfer).

Another thing to consider is the tax-advantaged status of the contributions. Pre-tax, or traditional 401(k) contributions can only be rolled to another traditional 401(k) to avoid paying income tax. Post-tax, or Roth 401(k) contributions likewise could only be rolled to another Roth 401(k). Most employers offer both kinds of accounts these days, so a pre-tax as well as a Roth balance is possible.

Many investment firms will sell you on the idea of rolling a 401(k) to an IRA account. This is because there are more fees to be made on behalf of the firm. The benefit to the investor with this strategy is an unlimited array of investment options, from mutual funds, to stocks, to REITs, to stock options, etc.

To the OP, glad to hear your attorney got smart about the 28%. WI sticks pretty hard and fast to the 50/50 marital asset rules.
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Old 04-17-2013, 10:15 PM
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CharlieNoonan,

I do not think her attorney got smart about the 28%. He was still talking to her about taxing it when she interrupted him to tell him it was not taxable in her case.

Did you read her last post? She got the information from her 401K representative and then told her attorney.
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Old 04-18-2013, 11:19 AM
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24 years,

Good for you for asking!!! I like getting this kind of information. We are just getting to the financial part of my divorce and it helps me know what to look for.

Taking charge of you life girl!
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Old 04-18-2013, 04:57 PM
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My lawyer and my STBXH's lawyer are hashing out the details as I am requesting alimony after one month short of 28 years of marriage. The county I live in is not good about granting alimony, but I am trying nonetheless as I will be in the poor house unless I remarry or get a roommate (neither of which are on my radar). The fact of the matter is my lawyer is the son-in-law to the judge that is known to be the worst with approving alimony; and they can't work together as it is considered a conflict of interest. I was advised to pick my lawyer (by a lawyer I liked and would prefer to have) in order to get a better judge (welcome to small town politics). I have an 18 and 17 year old at home (and a 23 year old who lives with a roommate).
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Old 01-23-2014, 07:01 PM
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When things get hard, you need to never pull money out of your investments. You may have a retirement account with some cash sitting in it, but it should never be touched. Even in an emergency, you can just get installment payday cash advances instead of getting of your retirement.
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Old 01-24-2014, 05:09 AM
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So your lawyer may not be the best person to be going through, small town or no.

That was a pretty clueless response about the 28% that could have seriously hurt your future payouts.

The anti-alimony family member also a big concern. I don't know if this person is competent or has your interests fully in hand here.

That sounds like what you may be feeling too. Trust your instincts. . .
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