401-k client wants to ‘disclaim’ or give away funds
I have a client whose prior husband’s 401-k was finally partitioned (through a 2001 divorce) and she has $33,000 available to her next month.
However, her current husband has abandoned her with 3 kids 6 months ago and left them in bad financial condition.
With 3 kids, she is eligible for $2,000 total per month from the State (rent subsidy, food and child support.
She can receive that $2,000 per month if she didn’t own the $33,000 401-k.
What are her legal options to ‘disclaim’ of give funds to a relative ?
Bob Yackey in La Habra, CA
[email protected]
Permalink Submitted by Alan Spross on Wed, 2009-05-13 20:45
She now owns the 401k account and assets already owned cannot be disclaimed. If she distributed the funds, assuming this is allowable under the plan, she would be taxed on the distribution. In addition, if she then gifted the proceeds (80% after mandatory withholding), it might disqualify her for the subsidies. CA statutes that deal with this particular benefit would have to be checked to determine the consequences of gifting away assets to qualify for benefits. It certainly does not work for Medicaid eligibility.