The joys of family, eh? So my husband and I (estranged but still living together, details in prior questions) met with a counselor last night who strongly suggested that we separate immediately to lessen the tension in the house and alleviate some problems the kids are having. Her thought was that even if we are able to stay together for awhile longer, too much damage has been done for the healing to happen while we're under one roof. We can't afford this, so my husband wants me to withdraw $50K from my retirement account (which will be $30K in cash after early withdrawal penalties and tax withholding) so that he can afford a place to live for a while and still pay me half of our childcare and insurance costs, which will be appx $1000 a month. If the separation is permanent, he would try to use this as a down payment on a small condo later but for now it would just give him extra cash.
He agreed that if I do this, the money withdrawn will be considered part of whatever is determined that he actually is entitled to if/when we divorce. So say the account has $200K now and he's entitled to half, he'll get $50K now and $50K more later, not half of the $150K left after the distribution, which would give him an additional $75K and amount to me paying him extra.
I met with a couple of attorneys about a month ago who were helpful and great, but I don't have the money right now for a retainer so I wasn't going to officially hire anyone for a while until I can save that up (I don't qualify for low-income legal aid or a sliding scale fee or anything like that). So...this isn't something I can have a retained attorney draw up and he wants me to start the paperwork on the withdrawal now so that he can get into an apartment on 8/1.
I'm thinking that I can write a Stipulation of the Parties detailing the retirement distribution and what he'll pay me for now (half of childcare and health insurance) that we both sign under a notary, honor that for now and then have that filed with the rest of the temporary support orders when we actually get around to hiring attorneys or a mediator in a few months.
Is that crazy risky? Would you just hire an attorney for this single agreement? If you would/have, how did you find an attorney quickly who was willing to quickly turn around a single document that's not even getting immediately filed?
Thanks for any advice/recommendations!
Thanks everyone! I should have stated that after talking with attorneys, it's clear that I will owe him a large chunk of this and I work in the retirement industry and had prelim calcs done on what he would get based on all of the factors, including his own paltry savings and the negative equity in our house. It's less than half, but over the $50K he wants to take out now. Three different attorneys (2 I met with and 1 that he met with) came up with roughly the same numbers. While I won't touch my remaining balance whether we do this now or later, what he chooses to do with his chunk - which is cash it out and pay the penalties instead of just have his portion moved to a QDRO account to retain all assets - is his decision.
Jackie, you bring up a great point with the taxes, though, that will definitely complicate things if we do this with the account in my name vs. him cashing out after the assets become his. Thanks for bringing that up!
Julie S. I might take you up on your offer - I'll PM you, thank you!
Guess I'll call the attorney I was going to hire in a few months and see if he can work on this outside of the retainer. What a pain, I really need to pay my bills and not pay lawyers for paperwork...
I am very much NOT a lawyer, nor a financial advisor. But my uneducated impression is that this is very risky. And I don't understand why he needs $30K to rent an apartment and cover 1/2 of childcare (he has a job, right?).
My ex sister in law did not receive any of my bil 401K since she had her own. His was quite a bit more but he put into it long before they got married. He did have to list her as beneficiary until the kids are 18, then he can change it to their names. I would not do this. It is like giving him money so he can pay you money. I former friend got a divorce. She had no 401K or any retirement. She only received 1/4 of his plan so there is no guarantee he would receive half. She wanted half but was denied.
This is beyond a messy way to do this. First of all divorce is a reason the IRS waves the penalty but only if your divorce is final by December 31st for this transaction.
How underwater is your home, sorry if I got that wrong but thought you mentioned you owed more than it is worth. The reason I ask is this and the 401k tend to be the biggest assets to deal with. Before you agree to anything you need to do some rough math. Add together both 401ks, any savings, not the house but if there is any equity in it add that in. Then you deduct credit cards, loans, except car loans because they have math like the house, and if you have negative equity in the home you deduct that. This gives you a rough idea of your marital assets and he will only get half of that. So say this magic number is 100,000 and he has 40,000 in his own 401k you only have to give him 10,000 of your 401k. This is where you will screw the pooch if you give him 50k.
Please feel free to PM me with numbers and I will do the math for you. I am in fact an accountant and someone who went through a war of the Roses divorce. I would rather give you a rough answer using real numbers than have you screw the pooch.
Argh, just thought of something else that makes me think you do in fact need an attorney, not it is a nice thing but a NEED. Marital assets are reduced by living expenses. So he can go to the court if this isn't locked down and show he used this much for his rent, this much for insurance, blah blah blah and have that amount reduced. It may be safer for you to cover the childcare and insurance yourself, somehow, and then show that in court to reduce what he gets in the settlement. Not sure if that makes sense. It is easier to change the number going one way, which would be how much of the 401k goes to him, than pull money back from him. In that case the court tends to tell you let it go and again, a pooch, and some screwing.
He wants you to withdrawal funds for your retirement fund? How convenient--for him.
Bad idea.
Better to agree to you handle the childcare or insurance 100% for a few months to give him some liquid cash every month.
Or tell him to get a 2nd job. That ought to help him out.
No way would I agreed to that JB. Sorry.
He will blow through that money and come asking for more.
No, no, no. Do NOT try to do this without the help of an attorney. This is one of the biggest financial decisions you will make, and has a lot of emotional issues entwined in it. This is not something you should do from "LegalZoom" or one of those places.
Lawyers cost money, good lawyers often cost more money. I get it. However, lawyers cost even MORE when they have to clean up people who start their divorce pro se and create even more legal work for them to clean up the mess.
You seem like a well educated, well spoken person. However, you are not a lawyer - you wouldn't let a dentist fix your car and you wouldn't let a mechanic pull your teeth. Why would you try to write your own legally binding agreement?
Meet with a divorce attorney. Have him help you get your husband out of the house now. Start the proceedings to move forward immediately. The lawyer may suggest that you take money to pay him out of your retirement (your QDRO share would be reduced by that amount) but it will be the best money you ever spend to protect your future.
Good luck - I really hope everything works out! If I sound "harsh" in my post, I really, really do not mean to :) I just see situations like yours that could have been avoided (assets unequally divided) because folks took matters into their own hands and I don't want to see that happen to you.
Nope.
No one puts their hands into the retirement cookie jar.
Make no financial decisions without a lawyer.
Proceeding without a lawyer could really come back to bite you in the behind.
Do not do it.
He can rent a room from someone if a whole apartment is beyond his financial means for right now.
How he moves out is not your problem - he's got to do this on his own two feet.
Hasn't he found a girlfriend who will let him shack up with her by now?
No, NO. Don't touch your retirement accounts until/unless you've been court ordered to do so as part of the formal divorce agreement.
You absolutely need a divorce lawyer, ASAP. Make no financial decisions without one.
J.B.,
This sounds way too risky to even contemplate without an attorney.
Under most circumstances, I'd agree that living separately as soon as possible would be best, but in this case, taking money out of retirement and losing $20,000 in penalties and taxes in the process is a bad idea.
I am not trying to undermine the advice of your counselor, but she doesn't have to eat that retirement loss---YOU do. That just seems crazy to throw that kind of money away.
I'd say a better plan is to have both of you sit down and rework your budgets and start saving for a fund to get him in his own place. You might have to make some tough decisions and really tighten up more than you ever thought possible, but it is much better than throwing that $20,000 out the window.
I don't see why he would need the $30,000 upfront right now (even with his part of childcare and insurance) to do this. Folks making very minimal wages are able to get themselves a small apartment without that kind of money. He does work, right? And just because he WANTS you to do it so he can be in an apartment by August 1 doesn't mean you have to agree to this.
Another thing to consider is if you hand this all to him in one big chunk and he blows it on other things that aren't primary needs, then what? The money you were counting on coming from him for childcare and insurance will be gone.
Let J. S. run those numbers for you, and please talk to an attorney before you do anything. You've worked hard for that retirement, and even though you have to hand some of it over in the divorce, it doesn't mean you have to agree to this plan of his now.
I feel for you. This is a really tough situation, but step back and look at the big picture and get professional advice before doing anything.
Sending good thoughts for strength and clarity, J.B.
J. F.
Talk to a CPA. Personally, I think getting into retirement accounts is a terrible idea.
Starr's comment is very wise; listen to her :).
My instinct is that you want to make as little change in your financial status as possible until you are working with a lawyer for the divorce settlement, and digging into your retirement fund early is a BIG change. Also, it make no sense to me for you to give him money which he will in theory then start handing back to you a bit at a time for his portion of the insurance and kids' expenses--especially since that money is supposed to be getting interest in a retirement account. Wouldn't it make more sense for him to just leave, rent a small place which he can pay for, and you keep a running tab of what he will owe you for his portion of the kids' expenses? Good luck, whatever you do.
Seems like there has to be some other way to do this other than kissing goodbye to $20,000.
Crazy risky in my book. Hire an attorney. We had to shop around but we did find a good attorney who was willing to do a payment plan for us.
The first time through the divorce my husband made some unwise choices (namely being way too trusting of his then wife and it wound up screwing him badly). In the long run it costs significantly more financially and emotionally to undo bad choices and bad rulings made during a divorce. We had to hire a second attorney to fix mistakes and she was overwhelmed so we wound up hiring a third attorney to finally get it all straightened out. It was way more money and time than it should have been had he approached his divorce with a lawyer in the first place. Good luck.
In addition to the legalities of such a decision & how it would be handled in the asset determination of your divorce, there is also the financial implications to consider.
If you take out $50K, that is not just $50K that needs to be put back in. Your retirement account is an investment that continues to grow (I hope!), and you need to consult with a financial advisor to find out how much your account would be expected to grow to, with & without the $50K, in a certain period of time.
So pulling out $50K now could mean a loss of $75K over 5 years for example, which means that much needs to be put back into the account to bring you to the same balance in 5 years that you would have been if the original amount had not been reduced.
My only "experience" to share about this type of situation is that when my folks divorced 10+ years ago, only one of them got the retirement account, & assets were divided in other ways to make it equitable. My folks parted on very good terms, & my dad actually did quite a bit to make sure my mom was going to be financially sound when the split was finalized.
In your case, at the very least, contact the person who manages your account to ask their advice. T.
Speak with an attorney.
To much red tape and red flags to do on your own. Yes, the lawyer costs but I wouldn't want my husband to screw me over one more time just to feel better with my own money.
Seek a good attorney and get a pay plan and do what is needed. The children are going to need counseling regardless of the how and when this is all over so do it right the first time around.
I can't fathom why he needs that much money right off the bat just to move out. Anytime some puts a short deadline on something it is not right. So stay the course and stand back from the pressure he is putting on you. Let the girlfriend fund his sorry butt.
the other S.
I would get it in writing that this is a portion of what he will get in the divorce and I would be sure that he is also responsible to help pay the taxes on it. Even though you have them withhold taxes you still have to pay more when you file your return (I know this from taking out money from our retirement).
You could make your own letter/agreement and just have it notarized when you both sign it.
Just a thought, is there anyway you can have him stay in the house? Does your basement have a separate entrance or maybe some where that can easily be separated from the rest of you?
ADDED**
If you take money out this year you will still need to file jointly for 2015. At that time you can figure out what needs to be paid to the IRS and deduct his amount from the remaining money. Just be sure to have EVERYTHING in writing with at least a notary's signature.
Can you get a 401K loan? If you can, you can "borrow" the money and then pay yourself back. You won't have any penalties as long as you pay it back. Generally speaking, you would have 5 years to pay it back.
Also, I wouldn't be so sure he would be entitled to 1/2. It would depend on when y'all got married and if there were funds in it before marriage. I wouldn't automatically agree that he gets 1/2.
I would also question the amount he wants. That's a lot. Why does he need that to help pay for childcare and insurance? Doesn't he have a job that would help pay for those obligations? I'm confused with that.
Would I do this without an attorney? Honestly with how he has been in the past? No. I would want to make sure that everything was dotted and crossed. It might be worth for peace of mind but I think the amount is way too much but that's me. Again, it might just be worth it to get him out of the house!!!
If you do this you need to get everything in writing and notarized, oral agreements can be hard to prove and are often not considered binding. Why does he need such an amount? If all he needs is first and last months rent to get into a place maybe he could take out a small loan or you could give or lend him most that amount?
What happens if you give him the money and then he doesn't pay child support? Why does he get a condo before you two are divorced? Forget that!
if it will get you under different roofs, i think it's a great idea. especially since you're not just 'giving' him 50K, it will be part of the ultimate divorce settlement.
i can't wait for you to be out from under the psychic cloud.
khairete
S.
