{"id":4931,"date":"2019-09-16T15:50:01","date_gmt":"2019-09-16T15:50:01","guid":{"rendered":"http:\/\/fkmalaw.com\/?p=4931"},"modified":"2019-09-16T15:50:01","modified_gmt":"2019-09-16T15:50:01","slug":"using-qualified-domestic-relations-orders-to-collect-child-support","status":"publish","type":"post","link":"https:\/\/windycityclients.com\/franks\/using-qualified-domestic-relations-orders-to-collect-child-support\/","title":{"rendered":"Using Qualified Domestic Relations Orders to Collect Child Support"},"content":{"rendered":"

Imagine a situation where a potential client walks into your office with a child support issue they want you to fix.\u00a0It could be the non-custodial parent quit their job, moved to a different state, or just simply fell off the face of the earth.\u00a0 As you are collecting information on the facts of their case, you might want to ask the custodial parent is where does the non-custodial parent currently works and where did the individual work in the past? The one source of child support payments often overlooked is a retirement plan, whether it be a 401(k) or a pension.
\nI have had several cases where I have been retained to tap into retirement plans to pay off child support.\u00a0Some cases involved existing child support obligations and some cases where the custodial spouse was awarded a lump-sum arrearage amount, pursuant to a judgment, on past child support.
\nIn a prior case involving a banker who was convicted of embezzling funds, and was incarcerated, the wife was owed $220,000 in child support with no ability to collect, given the now ex-husband was in prison.\u00a0The first question is where did he work and what kind of retirement benefits did he have.\u00a0In this case the husband<\/a> had in place a 401(k) account and a pension through his previous employer.
\nWhile it is well known that retirement plans are protected, so there is no action that can alienate someone from their retirement benefits.\u00a0This is true when it comes to creditors, but not true when support is involved or, as is most often the case, the retirement plan is being divided as a marital asset.\u00a0The instrument used in facilitating a transfer from one party to another is a Qualified Domestic Relations Order (QDRO), a document specific to a retirement plan.\u00a0There are thousands of retirement plans all having their preference as to what they want to see in an Order.\u00a0In other words, there is no one Order (QDRO) that works for all plans.
\nGetting back to the banker who was in prison, once it was discovered that he had a fairly sizable 401(k) balance, I was able to prepare a QDRO to access those funds to pay current and past child support.\u00a0The authority for doing so?\u00a0The Internal Revenue Code and ERISA, an acronym for the Employee Retirement Income Security Act which was amended in 1984 for the purpose of awarding a spouse, or custodial parent, child support, alimony, or as a marital asset.\u00a0An alternate payee<\/a> in a QDRO can only be a spouse, former spouse, or dependent of the individual in the retirement plan.
\nIn summary, the banker thought he was going to get out of prison possessing the ability to live off, what he thought, would be his sizable 401(k).\u00a0Instead, most, if not all of it was used to pay child support until the children reached the age of majority.
\nThe pension, albeit it pays a monthly pension benefit, can be used to pay the former spouse, or award a former spouse, child support that could not have been paid as a lump-sum, but instead is owed to them for having supported the children. Pension plans get a little tricky, but if there is no 401(k) to tap into, and the former spouse is holding a judgment for past child support arrearages, the pension plan is another source.\u00a0An issue you may encounter is the treatment of taxes on the client\u2019s awarded share.\u00a0Most plans will only tax the recipient, not the plan participant.
\nThis poses a problem since child support is not taxable to a custodial parent, but instead taxable to the non-custodial parent.\u00a0The way to deal with this, when the retirement plan in question is a 401(k), is to gross up the amount to account for the tax liability incurred by the custodial parent, and in the event the plan will not assign the tax liability to the plan participant.
\nIn another case, a non-custodial parent was terminated from their job because of alcoholism.\u00a0As it requires a period of time before a terminated employee can have access to their retirement monies to be rolled over or cashed out, a QDRO was used to secure child support prior to the plan making a distribution to the plan participant.
\nThese are just a few examples of how powerful of a tool QDROs can be.\u00a0With $16 billion dollars in child support going unpaid each year, $96 billion on the aggregate, and with roughly $5 trillion dollars sitting in 401(k)s in the United States, it only makes sense to include the potential for a QDRO in your arsenal of ways to help you client collect on child support.
\nContact Franks & Rechenberg, P.C.<\/a>, where we specialize in helping you defend your case.<\/p>\n","protected":false},"excerpt":{"rendered":"

Imagine a situation where a potential client walks into your office with a child support issue they want you to fix.\u00a0It could be the non-custodial parent quit their job, moved to a different state, or just simply fell off the face of the earth.\u00a0 As you are collecting information on the facts of their case, […]<\/p>\n","protected":false},"author":1,"featured_media":4933,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_et_pb_use_builder":"","_et_pb_old_content":"","_et_gb_content_width":"","wds_primary_category":0,"footnotes":""},"categories":[33,21],"tags":[34,22,35],"dipi_cpt_category":[],"class_list":["post-4931","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-child-support","category-family-law","tag-child-support","tag-family-law","tag-qdro"],"_links":{"self":[{"href":"https:\/\/windycityclients.com\/franks\/wp-json\/wp\/v2\/posts\/4931","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/windycityclients.com\/franks\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/windycityclients.com\/franks\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/windycityclients.com\/franks\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/windycityclients.com\/franks\/wp-json\/wp\/v2\/comments?post=4931"}],"version-history":[{"count":0,"href":"https:\/\/windycityclients.com\/franks\/wp-json\/wp\/v2\/posts\/4931\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/windycityclients.com\/franks\/wp-json\/"}],"wp:attachment":[{"href":"https:\/\/windycityclients.com\/franks\/wp-json\/wp\/v2\/media?parent=4931"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/windycityclients.com\/franks\/wp-json\/wp\/v2\/categories?post=4931"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/windycityclients.com\/franks\/wp-json\/wp\/v2\/tags?post=4931"},{"taxonomy":"dipi_cpt_category","embeddable":true,"href":"https:\/\/windycityclients.com\/franks\/wp-json\/wp\/v2\/dipi_cpt_category?post=4931"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}