On behalf of Stange Law Firm, PC posted in divorce on Thursday, August 17, 2017.
Missouri parents who are getting divorced, are already be divorced or who might have never married their child’s other parent may need to understand their options for making child support payments. Regardless of a person’s marital or financial situation, finding ways to incorporate this expense into a monthly budget can be difficult at times. One option that people could consider is leveraging their 401K account funds.
There is, however, a right and a wrong way of accessing 401K funds to pay child support. By simply taking an early pre-retirement distribution, an account owner may put themselves at risk of paying high early withdrawal penalties. As explained by the Internal Revenue Service, the use of a qualified domestic relations order may help people to avoid these penalties and thereby save much of their hard-earned savings.
A QDRO is a legal order that allows someone other than the plan owner to receive money from a particular 401K account. While the QDRO may commonly be known for its use in allowing retirement funds to be split between spouses during a divorce, it can also be used to name a child or other dependent as an alternate payee for the purposes of satisfying a child support order.
The United States Department of Labor indicates that a qualified domestic relations order may be established during the course of a divorce or on its own. In this way, it may be useful for unmarried or already divorced parents who are struggling to make their child support payments. Payments may be made directly to the child or to a guardian on behalf of the child.