When you and the parent of your children choose to get a divorce, one of you may end up being required to pay child support.
If you are the parent who must make child support payments to your minor children, you may well wonder how you will be able to afford these payments on your reduced post-divorce income. Some parents may look to their 401K accounts for an option here.
Retirement savings and domestic situations
The United States Department of Labor indicates that some people may have the ability to access their retirement savings to satisfy a child support order. This may happen through the use of a qualified domestic relations order. People may also use a QDRO to pay spousal support awards and to direct the splitting of a 401K account with a former spouse as part of the couple’s property division settlement.
Understanding the QDRO
A QDRO works by establishing another person as an alternate payee on your 401K account. For the purposes of satisfying a child support award, this alternate payee may be your child or dependent. The alternate payee may also be the parent or other adult guardian of your child or dependent if the child or dependent is still a minor.
Income taxes and child support
The use of a qualified domestic relations order does not change how money paid as child support is taxed. The parent who makes payments must pay income taxes on the money.
This information is not intended to provide legal advice but is instead meant to give divorcing parents in Florida an overview of how they may utilize their retirement savings to pay child support to their minor children.