QDRO is an incredible tool that divorcing couples can use to divide some assets, such as IRA, 401(K), 401(b), and so many others. However, when it comes to using that money to buy a house, there are numerous factors to consider before proceeding.

The fact is that you can used funds under QDRO to finance a home, but it is important to understand how the division works and the tax implications. If you don’t have a QDRO in place, you’re likely to pay 10% on tax.

For instance, funds rolled into a traditional IRA are subject to a 10% tax penalty unless you met the exemption. If you’re planning to use all your money to acquire direct rollover to your traditional IRA, it is important to note that the amount proceeds as direct rollover doesn’t attract any fee of any kind.

QDRO Distribution Options

Unless you’re in a haste, choosing to roll over your assets to your IRA will save you tons of money in the long run. It means that you’re no longer expected to pay the 10% tax penalty. 

It is worth knowing that some qualified plans don’t allow for plan distribution under QDRO until there is a triggered event, which could be teaching, old age, or getting separated. Distributions can be taken at a certain time, perhaps a specific period to rollover your IRA and have them distributed without the 10%.

Converting an asset to QDRO

When it comes to assets, you can easily them to a ROTH IRA. However, you’ll pay a certain amount until all agreements as stipulated on the QDRO plan are met. Some QDRO cannot be distributed unless the plan participant experienced a triggered event, such as retirement, or divorce.

Mistake when dividing a 401(k) assets

There are different types of retirement account, and they all come with different rules that the parties involved must flee. Note that divorce executed after 2018 will attract taxes when the alternate payee. It has the potential to make the divorce a bit messer, impacting the division of retirement assets.

The types of asses in question will determine the process for division, you must work with an experienced QDRO attorney to guide you through the process. With someone who has a comprehensive overview of how QDRO works, you will be able to make an informed decision that you wouldn’t regret.

If you’re in this dilemma and you’re looking for a legal representative to help you, we’ve got you covered. We are versed with all the laws and rules that govern the QDRO, and we’ll ensure that you buy your new home without sweating. Go ahead and give us a call 718-355-9430, or perhaps fill the contact form.