Divorce & 401k Split/Distribution
My parents finalized their divorce and one of 'em asked if knew how to handle the 401k in order to defer taxes.
I think I know the answer but I'm just not completely sure due to the divorce factor.
Basically, what I assume happens is that the 401k is divided and a check must be issued and distributed to both parties to finalize the deal. So I think what must be done is that my parents need to set up a rollover IRA, have the check be made payable to the institution - Vanguard for example - that will manage the rollover and simply fund it from there with the proceeds. To me, these actions would defer taxes.
I guess my question is - the 401k is from my dad's account and has been funded with his earnings. If 1/2 is distributed to my mom's name, is there any tax liability simply due to the transfer itself since she was not the one who funded the 401k/etc.? If there is tax liability, any way to minimize it? Thanks for any help.
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