Florida residents who get divorced know that they have many financial decisions to make during the process. There may also be ongoing financial obligations once a divorce has been completed, such as the need to make spousal support or child support payments. People who must make these payments should know that they may have the option of utilizing funds from select retirement accounts or pension funds for these purposes.
While some spouses may be aware that retirement funds may be split as part of a marital property division settlement, not everyone is aware that retirement assets can be used to make support payments. If this is to be done, the Internal Revenue Service explains that a Qualified Domestic Relations Order may be required. A QDRO may allow people to access money from 401(K) or other accounts for select domestic relations needs.
Payments made to a former spouse as part of a property division settlement may be able to be made sans taxation if the recipient reinvests the money into a qualifying retirement account. Payments made to a former spouse as part of an alimony settlement may be taxable to that receipient. Payments made to children for child support may be taxable to the plan owner.
The United States Department of Labor indicates that a retirement plan administrator must approve all QDRO agreements and notify the appropriate parties about all transactions. A QDRO must provide detailed information about the payment recipient, the exact amount or percent of a plan to be paid to the recipient and the number of payments to be made.
