Husband and I are divorcing.
Simple divorce, no real estate, no kids, married less than 5 years, no lawyers involved. Community property State. Filed already, not final until March 2008. Agreed to not touch each others 401K's as it would have been a wash. This agreement is included in divorce paperwork wording. HOWEVER, I just found out that he had another 401K that WAS NOT declared to me or included in divorce paperwork. All funds that went into this 401K were contributed while we were married. Balance that is vested, is $26K so I am going after half. He claimed to have "forgotten" this account. Yeah, right. If he's that far gone mentally, he needs to be in a home. ;-) He has verbally, and via email, agreed to pay me half. Wants to write me a personal check for 1/2 of my 1/2 in next month, the balance next year so he spreads the tax hit over
2 years. *Based on previous history, I don't have any reason to trust that he will honor his word.* I suggested that he take a loan from this 401K to pay me my half of the balance, then pay himself (the 401K) back. Seems like a win-win. I get my $ now and don't have to fret that it won't happen in the future, and he doesn't get hit with taxes if he pays himself back. ANOTHER HOWEVER, he is NO LONGER working for the business that this 401K was established through. AND (this is how I found out about the account) the 401K was recently transferred from one company to another; i.e. from Fidelity to T. Rowe Price. So, not sure if it's still considered a 401K (like did the business he used to work for transfer their 401K plan from FI to TRP?) or if it was transferred because he's no longer an employee? Am hoping he can take the loan because that will assure I get my half vs. having to trust an untrustworthy person!! Also, what tax implications would there be for me if he pays me via check and I use some of the money to pay off a credit card, some to pay on my car loan and bank the rest? THANKS!!!!! (sorry to be so wordy, but felt it pertinent to give all the details)