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My client was obligated to withdraw and split his 401k with his former spouse in a divorce settlement, can he avoid the 10% penalty?

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Level 1
 
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4 Replies 4
Level 11

No.

But he probably should sue his divorce lawyer for incompetence.  The 401k should have been split via a QDRO, which would have essentially given each spouse 1/2 without needing to withdraw it.

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Level 6

When you say he was "obligated," that might have been done with a QDRO.  Let's not get hurt, jumping to conclusions.  

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Level 11

@BobKamman wrote:

When you say he was "obligated," that might have been done with a QDRO.  Let's not get hurt, jumping to conclusions.  


 

You could be right.  But he also said "withdraw" the 401k, which implies it is not a QDRO (at least that is how I interpret the word "withdraw").

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Champion
Champion

If done with a QDRO There will be no 10% penalty, but if your client fails to roll over the funds to an IRA within 60 days he will pay tax on the distribution, and if no QDRO a 10% penalty also