If you are headed for or even in the midst of a divorce in New Jersey, you may be concerned about the prospect of paying spousal support to your to-be former husband or wife. Regardless of your income level and how much money you are ordered to pay, this can cause a big strain on your monthly budget and add a lot of stress to your life. If you have a 401K or other ERISA-qualified retirement plan, you may be able to get some help by accessing these funds to help you satisfy this obligation.
The U.S. Department of Labor explains that you can use a qualified domestic relations order to name your spouse or former spouse as an alternate payee on a qualifying retirement account. This is important because typically you are the only one who can receive payments from your retirement account. If you simply took money from your 401K and then paid it to your spouse, you may be on the hook for early withdrawal fees and taxes.
With a QDRO, you may avoid these taxes and penalties. Your partner would be responsible for any taxes on the money distributed to them as it would be considered their personal income. The QDRO also gives you protection against the early withdrawal penalties.
If you would like to learn more about your options for satisfying spousal support obligations by using your retirement funds, please feel free to visit the qualified domestic relations order page of our New Jersey divorce and family law website.