Common Uses of In Marriage QDRO®!

Mary and Frank have a prenuptial agreement because Mary comes from a wealthy family. Mary wants to provide some financial security for Frank even though she does not wish to convert to a joint property regime. Mary has $600,000 in a qualified profit sharing plan. Without the In Marriage QDRO®, the normal way to provide such security is to simply READ MORE

Mary and Frank have a prenuptial agreement because Mary comes from a wealthy family. Mary wants to provide some financial security for Frank even though she does not wish to convert to a joint property regime. Mary has $600,000 in a qualified profit sharing plan. Without the In Marriage QDRO®, the normal way to provide such security is to simply fund an account for Frank with after-tax money.

Option 1: Due to Mary’s wealth, she is probably at a high tax rate. Any funds she gives to Frank would have already been taxed at Mary’s higher rate. With In Marriage QDRO®, Mary can transfer pre-tax funds from her profit sharing plan to an IRA in Frank’s name. If Frank needs the money now and is under 59 ½, he can liquidate a portion of these funds without the 10% early withdrawal penalty and it is taxed at Frank’s tax rate, which is presumably lower than Mary’s tax rate.

Option 2: If Mary believes an annuity is the best investment vehicle to provide security for Frank, she can still buy the annuity. The only difference is that an In Marriage QDRO® would allow Mary to transfer pre-tax funds into Frank’s name and Frank could buy the annuity. Without an In Marriage QDRO®, Mary would have to purchase the annuity with her after tax money. Thus, the In Marriage QDRO® could potentially save Mary a significant amount in taxes and/or allow her to transfer more funds to Frank.

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Jon wants to do an In-Service Distribution, but only wants to withdraw the after-tax portion of his 401(k). His family wants to put a down payment on a house. However, the Plan’s In-Service Distribution rules require the liquidation of pre-tax funds before allowing Jon to access the after-tax portion. An In Marriage QDRO® may allow Jon to select precisely which portion READ MORE

Jon wants to do an In-Service Distribution, but only wants to withdraw the after-tax portion of his 401(k). His family wants to put a down payment on a house. However, the Plan’s In-Service Distribution rules require the liquidation of pre-tax funds before allowing Jon to access the after-tax portion.

An In Marriage QDRO® may allow Jon to select precisely which portion of his 401(k) he would like to remove, including withdrawal of the after-tax portion without disturbing the pre-tax portion. Also, if the non-employee spouse is under 59 ½, then the parties could even liquidate the funds without the 10% early withdrawal penalty.

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Michael has $1,000,000 in a 401(k) plan. His wife, Stephanie, is much younger and he is concerned about leaving her financially stable in case of health issues. An In Marriage QDRO® would allow Michael to take pre-tax funds that are captured inside the 401(k) and move them into an IRA in Stephanie’s name. This would allow Stephanie to purchase guaranteed READ MORE

Michael has $1,000,000 in a 401(k) plan. His wife, Stephanie, is much younger and he is concerned about leaving her financially stable in case of health issues.

An In Marriage QDRO® would allow Michael to take pre-tax funds that are captured inside the 401(k) and move them into an IRA in Stephanie’s name. This would allow Stephanie to purchase guaranteed annuity products based on her age and gender.

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A couple can take advantage of the real estate market or construction expertise to effectively manage rental properties and/or flip houses. An In Marriage QDRO® may allow funds from a 401(k) to be transferred into a self-directed IRA, which may hold real estate and other alternative investments instead of securities. READ LESS

A couple can take advantage of the real estate market or construction expertise to effectively manage rental properties and/or flip houses. An In Marriage QDRO® may allow funds from a 401(k) to be transferred into a self-directed IRA, which may hold real estate and other alternative investments instead of securities.

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Peggy is a state employee with a teacher’s pension. She is 50 years old and has been working with the state for 24 years. Peggy would like to retire soon, but she does not have 30 years of service and is not yet 55. She is married to Jim, who has a 401(k) worth $375,000. Peggy has a deferred compensation READ MORE

Peggy is a state employee with a teacher’s pension. She is 50 years old and has been working with the state for 24 years. Peggy would like to retire soon, but she does not have 30 years of service and is not yet 55. She is married to Jim, who has a 401(k) worth $375,000. Peggy has a deferred compensation plan that she only contributes $50 a month to because the state does not match contributions like Jim’s 401(k) does.

An In Marriage QDRO® allows Jim to transfer funds from his 401(k) to Peggy’s deferred compensation plan or regular IRA. This permits Peggy to purchase five (5) years of airtime service, which then puts her at 29 years of service. At 30 years of service, Peggy can retire with full state retirement regardless of her age.

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Jane is a 51-year-old employee of ABC Corporation with a 401(k) of $220,000. Jane’s husband just turned 59 years old and does not have his own 401(k) or IRA because he is self-employed. Their family is in need of additional income because Tom’s business has been slow the last two years. They previously took out a loan from Jane’s 401(k) READ MORE

Jane is a 51-year-old employee of ABC Corporation with a 401(k) of $220,000. Jane’s husband just turned 59 years old and does not have his own 401(k) or IRA because he is self-employed. Their family is in need of additional income because Tom’s business has been slow the last two years. They previously took out a loan from Jane’s 401(k) and another loan will not help their situation.

By utilizing an In Marriage QDRO®, Jane may transfer a significant portion of the $220,000 into an IRA in Tom’s name. Because Tom will soon be 59 ½, he will be able to draw funds from his IRA without a 10% early withdrawal penalty, including the option to make those withdrawals only in the months where his business does not earn sufficient income.

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