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Can I use 401K money to pay alimony?

When faced with the prospect of a divorce, if you are the spouse in your marriage who has the greater earning power, you may understandably be concerned about the prospect of having to pay spousal support. Whether your other spouse does not work at all and may be a stay-at-home-parent or whether there is simply a large discrepancy in the amount of money earned by each of you, you may may well need to do this.

Regardless of current income levels, you might find it a very real strain on your finances to make monthly alimony payments. You may be able to tap into your 401K account to get help in satisfying your spousal support obligation. The United States Department of Labor explains that with the use of a qualified domestic relations order, you can name your former spouse as an alternate payee on your 401K.

When you do this, you can have money paid directly from your retirement account to them. This may be in a lump sum or in ongoing payments. As is typical with alimony, taxes on the money recevied will be the responsibility of your former spouse. The QDRO may also help you avoid paying early withdrawal fees that would normally be assessed on distributions that do not meet standard retirement criteria.

This information is not intended to provide legal advice but is instead meant to give Illinois residents an overview of how they may be able to make spousal support payments using their retirement fund assets.

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Courtney, Clark & Mejias, P.C.
104 South Charles Street
Belleville, IL 62220

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