Your portion of the 401(k) should be transferred from your husband's account to a tax deferred account that you set up by way of a Qualified Domestic Relations Order (QDRO). This will prevent ant tax consequences to either of you.
This answer is for general information purposes, is not legal advice and does not create an attorney-client relationship. If you wish to schedule a consultation regarding your particular case, please call (757)533-5400.
The portion of your husband's 401k that you have agreed to receive can be rolled over into a new account for you without any tax implications. If your husband is taking funds from the account to pay you a lump sum, he will pay a penalty (tax and possible fee) and seek to pass this along to you. Other variables may relate to the specifics of your case. I would certainly discuss this matter with your accountant, tax attorney and matrimonial attorney for further information.
The issue the lawyer is raising is that if you are going to receive cash as your portion of his 401(k) instead of rolling it over into a 401(k) account of your own, the money would usually be tax impacted and further reduced due to present value calculations. What this means is that the money in the 401(k) is not as valuable as cash because when the money is taken from a 401(k) you must pay taxes on that money when it is withdrawn. The issue is further complicated because you can not take money from a 401(k) until you reach a certain age or else you pay penalties for an early withdrawal. Therefore, if you are trading a 401(k) for cash in a divorce, the amount is usually tax impacted and reduced for present value considerations. I can not say if the 20k is the right amount or not based upon the information given.
Legal disclaimer: This is not legal advice and is not intended to create an attorney-client relationship. The post is only an opinion. You should speak to an attorney for further information. The poster is licensed only in NY, CT & NJ. You can reach me at LMeyer@LongIslandLitigators.com. If this post is useful to you, please remember to upvote it. less
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