Advanced Underwriting Consultants

Question of the Day – July 31

Ask the Experts!

The professionals at Advanced Underwriting Consultants (AUC) answer the tax and technical questions posed by producers.  Here’s the question of the day.

Question: My client has a child support judgment against her ex-spouse.  Can she force him to transfer part of his 401K account to her in satisfaction of the judgment?

Answer: Probably not.

In general, Section 401K accounts are protected by ERISA rules against alienation, and are protected from bankruptcy claims by federal law.  That means that is someone sues a 401K plan participant, the creditor can’t get at the 401K account balance through the court process.  Similarly, if a 401K account owner declares bankruptcy, the 401K account balance is not considered to be an asset that is available to the owner’s creditors.

If the spouse owing back child support voluntarily withdraws money from the 401K account, then it is available to satisfy the judgment.

A spouse who is worried about her prospective ex-husband’s ability to satisfy child support obligations may be able to negotiate a transfer of assets in the other spouse’s 401K plan at the time of divorce.  However, if the spouse with 401K plan assets is not entitled to a distribution from the account, the fact that the parties are divorcing will not enhance the ability to access those account balances by either party.

Have a question for the professionals at AUC?  Feel welcome to submit it by email.  We may post your question and the answer as the question of the day.