QDRO Payment made to a child during divorce
Hi there, I’m wondering if the Slott team or anyone else has guidance for the following situation. What can a 39 year old adult do with a custodial 401(k)?
- The adult’s parents divorced when he was 19, and there was a QDRO payment from one parent’s 401(k) made to the child, with the OTHER parent as custodian on the account.
- 20 years later, the account is still titled as a custodial 401(k)
- The custodian says the only options are either a full, taxable distribution or moving the funds to an inherited IRA. Both parents are still alive
What are the options for the now 39 year old adult and these funds? Should he be able to move them to his own IRA/401(k) via 60 day rollover? Should he simply leave them in the 401(k) to grow tax deferred until retirement?
Permalink Submitted by Alan - IRA critic on Fri, 2024-12-20 12:10
Is the parent who had the 401k still working for that employer, and how old is that parent now?
Of course, an inherited IRA is not even an option with the parent still living. A QDRO is subject to distribution limitations that apply to the participant, but because a distribution was made 20 years ago, it’s odd that there are restrictions now.