When this distribution from my 401k to my stbx takes place, does he get cash or do they setup a similar account for him? He is under the impression that he gets cash and I think that if he wants cash, he will have tax ramifications for cashing out his account. Please advise.
I received my ex’s 401K and I opted to cash it out- what a huge mistake that was- I did not have them withhold enough taxes and when tax time came around I owed over 20K- it was a stupid mistake and I did not have all the facts. HUGE HUGE mistake.
If the distribution is done properly via a QDRO or a DRO the Plan will set up a new account for the alternate payee that retains its nature as a retirement account. The alternate payee is free to cash out his or her new account, and will suffer the tax consequences individually if they chose to do so.