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tony79

457 Rollover To Ex-spouses Traditional Ira

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Hi there. I'm trying to equalize assets with my soon to be ex-spouse. Can anyone tell me if a withdrawal from a 457 lan (I'm sepaarated from the local governemnt agency) would trigger the 59-1/2 early withdrawal penalty and/or the 20% withholding? I'm only trying to roll it over to her Traditional IRA. Is this possible? Thanks!

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The 10% excise tax for early withdrawal (generally before age 59 1/2) does NOT apply to 457(b) plans.

 

If you roll over your 457(b) account from the government-sponsored 457(b) plan DIRECTLY into your own IRA, then it also avoids the 20% withholding.

 

If you want to roll the funds (or a portion) directly into your spouse's IRA, then you do not have that authority. Your spouse would need to file a DRO with the plan administrator and attempt to do that themselves. If the plan does not accept any QDROs as a matter of policy of the plan, then the DRO gets rejected and we're done with this "rollover to the spouse" idea (457(b) plans are not required to accept QDROs, although many do anyway). If the plan accepts QDROs, then a valid QDRO is about the only way the plan administrator could direct a payment to your spouse (ex-spouse) instead of to you. If you have more questions about this, please let us know.

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Hi there. I'm trying to equalize assets with my soon to be ex-spouse. Can anyone tell me if a withdrawal from a 457 lan (I'm sepaarated from the local governemnt agency) would trigger the 59-1/2 early withdrawal penalty and/or the 20% withholding? I'm only trying to roll it over to her Traditional IRA. Is this possible? Thanks!

 

 

There is a very simple solution. As John has noted you can rollover your 457 plan account account balance (assuming it is an eligible 457b plan) to a traditional IRA without incurring the 20% or 10% tax. However, you dont need to go throught the expense of preparing a DRO to transfer funds to your ex-spouse. You can have the court order, either in the divorce decree or in a court approved property settlement that is part of the divorce decree, that some portion or all of your IRA be transferred to an IRA established by your ex. Under IRC 408(d)(6) the transfer to your spouse will be tax free and your ex will be taxed when the funds are withdrawan from her IRA. Your ex will need to establish an IRA and the custodian of your IRA will need to be sent the divorce decree and instructed to transfer to the funds to her IRA.

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